Jul. 26, 2012
Rashtriya Chemicals & Fertilizers Ltd. (RCF), India’s second-biggest state-run maker of soil nutrients, plans to buy into potash mines in countries including Canada to secure supplies, Chairman R.G. Rajan said.
The price of the commodity has increased at least 13 percent from a year earlier, as countries including China, the world’s largest consumer, paid more for imports after a drought in the U.S. pushed up the cost of grains.
Owning stakes in mines overseas may help the Mumbai-based company shield many of India’s 235 million farmers from rising costs when the annual monsoon is deficient. Lack of rain this year is threatening to crimp agricultural output. Potash, a form of potassium, is used by growers of crops including wheat, rice and sugar cane to strengthen roots and resist drought.
“India is a large importer of potash with no domestic supplies,” Jason Miner, a chemicals analyst in Princeton, New Jersey, said. “It’s logical to secure supply of potash particularly if the acquirer thinks that potash prices will rise more than generally expected.”
Rashtriya Chemicals joins companies including Sinofert Holdings Ltd. , a unit of China’s largest chemicals trader, that are looking for acquisitions overseas. Sinofert, 22 percent owned by Saskatoon, Canada-based Potash Corp. of Saskatchewan Inc., has been in talks about purchases, Chief Executive Officer Feng Zhibin said in March.
India and China, the two most populous countries in the world, need to boost supplies of potash to ensure food security. World potash demand will rise 3 percent this year, leaving a shortage, because of delays in commissioning new capacity, according to the International Fertilizer Industry Association.
Potash prices have risen to $505 a metric ton from $445 a year ago, Green Markets data show. Should a rally in corn and soybean futures continue, the fertilizer may gain further, Gilad Alper, senior analyst at Excellence Nessuah Investment House in Ramat Gan, Israel said.
Corn has climbed 43 percent starting June 1 on the Chicago Board of Trade and soybeans rose 23 percent during the period as U.S. farmers face the worst drought since 1956 causing concern about global food supplies.
Acquiring stakes in Potash mines “makes sense from a national perspective,” Alper said. “But, if India is so worried about securing supplies, it should get into long-term supply agreement with producers.”