Uralkali Expects to Sign Orders With China, India by August

OAO Uralkali (URKA), Russia’s second- largest producer of potash, expects to sign supply contracts for the fertilizer with China and India by August, with volumes potentially higher than last year.

“We’ve started official talks with China now,” Oleg Petrov, head of sales at Uralkali’s trading venture, said on a conference call today.

China has less than 4 million metric tons of the fertilizer in stock, about 40 percent of its needs for this year, with consumption “pretty good” in the first quarter, he said. India’s stocks are “very low” and it may buy about 5 million tons of potash this year, Petrov added.

U.S. crop yields may fall on lower plantings, he said.

Uralkali is seeking to establish a benchmark price for the Asian negotiations based on its increased sales to Brazil planned through next month and June, Petrov said. Several shipments have been sent to the Latin American nation since March, he added. The sales were transacted at $750 to $765 a ton, Uralkali reported on March 4.

Berezniki, central Russia-based Uralkali has been using 35 percent of its capacity in recent months, the minimum level to break even, as it curtails production because of falling demand, Chief Executive Officer Vladislav Baumgertner said on the call.

This month, the company had net debt of $141 million, with about $90 million due this year, and can extend its credit lines by $500 million, Chief Financial Officer Kuzma Marchuk said.

Uralkali doesn’t expect the Russian government to renew a 5 percent export tax on potash fertilizers that’s scheduled to lapse this year, Baumgertner said. The expiry will help to counter weaker sales of fertilizer as farmers struggle to access new loans and food prices are down from last year, he said.

The company faces increased competition globally in complex fertilizers, which contain potash coupled with nitrogen and phosphate, as farmers seek to cut costs, Baumgertner said.

To contact the reporter on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net;

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