According to the chief executive of ICL Israel Chemicals Ltd, Stefan Borgas, China and India are trying to negotiate a discount on the price of the crop fertilizer potash by $10-$20 per ton in the future contracts with global suppliers. The request seems to be a natural outcome of a general fall in potash prices, which have fallen due to oversupply caused by excessive mining capacity. Moreover, India and China were hit by dry weather that limited crop production and a new tax, respectively.
The contracts with these two giant economies are trend-setting as they set a floor for sales to the United States and Brazil. However, suppliers are expected to push back and further negotiate the requested cut. Mr Borgas explained that the suppliers “would always argue for more stable pricing or an increase, because if the industry is looking for new capacity, which it needs four or five years from now, then they need to give us incentive to invest”. China’s contract expires at the end of this year and it is set at $315. India’s $322 contract ends in March 2016.
ICL is a major potash supplier for both economies but China and India also buy the nutrient from Canpotex Ltd, which represents Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc, as well as Uralkaliy PAO and Belaruskali. ICL is not negotiating much with shareholder Potash Corp, which owns 14 percent and considers selling its stake. Although Potash Corp would be keen on having a majority stake in ICL, it has never formally approached the company or the Israeli government. The main concerns of a possible takeover are naturally jobs, investments and management remaining in Israel.