Just as potash prices have started to see some life, there is a potential development that could knock down demand from one of the world’s major consumers. According to Reuters, an Indian ministry has proposed slashing potash subsidies by 17% in the next financial year to reduce the fiscal deficit.
According to a senior government official who spoke on the condition of anonymity, India’s fertilizer ministry has proposed fixing the potash subsidy at 7,669 rupees ($114.61) a ton for the 2017/18 fiscal year beginning in April, down from 9,280 rupees per ton this year.
India is a major potash importer, and therefore a significant market maker. Indian buyers purchase their potash in annual contracts that are usually set before the start of the fiscal year. Contracts signed by India make one of the global benchmarks and have a significant influence on overall global potash pricing. If the subsidy cut goes through, there are a couple of strategies Indian buyers may implement. They may push for lower prices in their annual contracts, they may pass down the costs to farmers, or they may forgo purchases altogether. Any of these options would have a negative impact on demand. Earlier this year Potash Corp. of Saskatchewan cited a potential pickup in potash demand from India as a positive for the market, looking forward.
In company news, Israel Chemicals (ICL) this week reported a smaller than expected drop in fourth-quarter profit and revenue on Wednesday, helped by its specialty products and record potash sales. ICL, the world’s sixth-largest potash producer, posted net income excluding one-time items of $114 million in Q4, compared to $180 million a year earlier, and above the forecast of $73 million by Thomson Reuters I/B/E/S. Revenue dropped 6% to $1.34 billion, but it topped the forecast for $1.29 billion.