UPDATE 2-Agrium sees Canpotex potash deal with India Feb-March

Wed Jan 30, 2013 5:31pm EST

Related Topics

* Tone of pricing set with China - CEO

* Canpotex deal to give India discount

* Sees 2013 global potash shipments 54-56 mln tonnes

* Agrium not considering spinoff of potash business

By Rod Nickel

Jan 30 (Reuters) - Canadian fertilizer company Agrium Inc expects North American potash producers to strike a deal with Indian importers in February or March, ending a long standoff, Chief Executive Mike Wilson said on Wednesday.

Agrium, along with rivals Potash Corp of Saskatchewan and Mosaic Co sell potash to off-shore markets through the jointly owned Canpotex Ltd.

Canpotex negotiates contracts with buyers in China and India, setting a floor for spot sales to other markets such as Brazil.

China held out months longer than expected before agreeing to a six-month potash contract with Canpotex in late December, while India remains on the sidelines.

"The tone of the pricing has been set with China so it's not to any huge advantage for India to hold out," Wilson said in an interview with Reuters. "They're not going to do any better in my view. China set the floor from which we're going to go forward on."

A subsidiary of China's Sinofert Holdings Ltd agreed to buy 1 million tonnes of potash during the first half of 2013 at an estimated $400 per tonne, a 15 percent discount from the previous Canpotex contract.

India stopped buying last year after a reduction in government subsidies made the fertilizer too pricey for some farmers. Indian importers have also said they have ample potash supplies currently, and don't need to sign any contracts until spring.

Wilson said he doesn't believe that.

"I think their inventories have actually come down quite a bit and they'd be taking a risk by waiting that long. They won't do it, but they'd be taking a fair risk," he said.

Wilson concedes that the next Canpotex contract will include a price decrease for India and that "it's just a question of what the number is." It's also likely to be a large volume, he said.

"I would think the Chinese and the Indians realize we've hit the floor and are starting to turn around, so they'll try to maximize their volumes."

India's return will be the key factor in how much global potash shipments will rebound in 2013, Wilson said. A prolonged Indian absence from buying could result in shipments of around 54 million tonnes, but a quicker return might push sales to 56 million, he said.

Global potash shipments in 2012 were an estimated 51 million to 52 million tonnes.

Agrium is resisting pressure from its largest shareholder, hedge fund Jana Partners, to sell off its retail division. But Wilson said the Calgary, Alberta-based company isn't looking to spin off its potash business either.

"The potash business is very valuable for us ... I don't see anyone giving us an offer. We haven't looked at spinning off our potash."

Agrium operates one potash mine at Vanscoy, Saskatchewan, and is also one of the world's biggest nitrogen producers.

Agrium shares closed slightly higher in New York and Toronto on Wednesday. They hit a record high earlier this week.

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