Breaking News

Germany Defeats Argentina for Fourth World Cup Title
Tweet TWEET

Uralkali Sees Support for Potash Prices Above $300

OAO Uralkali, the Russian potash producer that exited a venture controlling almost half of global exports in July, said prices are unlikely to fall below $300 a metric ton as Asian and Brazilian demand will support sales.

“A potash-price decline below $300 a ton is not likely,” Chief of Sales and Marketing Oleg Petrov said in Moscow. “If it happens it would only be for a short time.”

Uralkali, the world’s biggest potash company and the lowest-cost producer, quit its trading arrangement with Belarus on July 30 after partner Belaruskali started selling the crop nutrient independently of the joint venture. Uralkali Chief Executive Officer Vladislav Baumgertner warned prices may drop below $300 with the loss of the traditional production controls.

“When the price goes to a level of $300 a ton, demand from China, Brazil, South Asia will increase, pushing the price up,” Petrov said yesterday in an interview. The spot price in China, the largest potash consumer, has fallen to about $325 a ton from about $350 in July, he said.

Since exiting the joint venture, Uralkali has ramped up to maximum output, having run at an average 70 percent in 2012. The Berezniki-based company sold about 800,000 tons of potash in August to China, India, Brazil and South Asia, Petrov said. That compares with 1.9 million tons for all of the first quarter.

CEO Arrest

Uralkali alienated Belaruskali with its exit from their marketing venture, Belarusian Potash Co., or BPC. Belarus has responded by detaining Baumgertner on suspicion of abuse of office, and is also seeking to arrest billionaire shareholder Suleiman Kerimov and four other employees, including Petrov.

“We are not looking to win any markets from Belaruskali,” Petrov said. “We have a target to sell all the volumes we produce and this is possible by winning markets from international players in some regions who earlier had taken our market share.”

North American producers of the crop nutrient, which include Potash Corp. of Saskatchewan Inc. and Mosaic Co. (MOS), took 10 percent of the South Asian market from Uralkali last year, according to the executive.

Uralkali is executing an option to sell 500,000 tons of potash to China from August to the end of the year. The company will also seek a new contract with China to send supplies by sea, adding to rail shipments, according to Petrov, who said the country won’t be ready for talks before the end of 2013.

Belarus Accusations

Petrov is no longer traveling abroad after Belarus said in August it will seek a warrant for his arrest, accusing him and other employees of a criminal scheme. Baumgertner was detained in Minsk, Belarus, on Aug. 26 after being invited to the country by Prime Minister Mikhail Myasnikovich for talks.

Petrov blames Belarus President Aleksandr Lukashenko’s aides for misinforming the leader and causing the breakup.

“My personal opinion is that there was a group of people in Minsk interested in creating a potash-trading structure outside BPC, namely Belneftekhim CEO Igor Zhilin and his team,” he said. Zhilin, appointed in 2011 to state-held Belneftekhim, which manages Belaruskali, may have been “purposely disinforming Lukashenko about the situation in BPC.”

Belneftekhim executives convinced Lukashenko that Belarus could easily sell as much as 1 million tons of potash on top of its BPC sales and that Belaruskali didn’t need to have so much of its capacity offline, according to Petrov. Uralkali was keen to maintain the joint venture and did everything possible to keep it stable, he said.

Marina Kostiuchenko, a spokeswoman for Belneftekhim, didn’t answer multiple calls seeking comment. Dmitri Rokhodski, acting head of sales at Belaruskali, declined to comment.

Stock Slump

Uralkali’s departure from BPC sent the shares of its global competitors tumbling as investors feared a slump in prices for the fertilizer ingredient. Farmers apply potash to help strengthen roots and make crops more resistant to drought.

The breakup has hurt Belaruskali, which sold only about 200,000 tons of potash in August, Petrov said, citing the loss of BPC’s marketing managers to Uralkali as one reason.

“It happened not due to higher salaries offered, but just because Belaruskali executives created an uncomfortable atmosphere in the company,” Petrov said. The Soligorsk, Belarus-based producer also has no clear sales strategy and lacks partners in the markets it’s targeting, he said.

Uralkali is better positioned than anyone to operate in the new environment, according to the executive. “We have the lowest cost of production, the best marketing team, and we are well positioned to buy local distributors in the regions where our largest clients are,” he said, without identifying any.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.