Uralkali Cuts Potash Output Target by 8% to Support Price
OAO Uralkali (URKA), the world’s largest potash company by production, cut its output target for this year by about 8 percent to support prices.
The company cut projected volumes to 11 million metric tons from 12 million tons, Chief Executive Officer Dmitry Osipov said at Uralkali’s Capital Markets Day today in Moscow. The fertilizer maker will continue to consider market conditions when weighing production levels, he said.
Uralkali broke up a trading venture with Belarus last July and said it will operate at full capacity to regain market share, a step that roiled the $20 billion global potash market. Potash prices slumped as much as 30 percent to as low as $310 a ton by December. They have since recovered to some $350 a ton.
“Market share is important for us, but we don’t want prices to fall,” Osipov said in an interview this month, signaling that the company may lower its production target.
Last year’s industry crisis, which followed Uralkali’s exit from the venture with Belarus, led to a “more healthy environment” in the market as producers have since adopted more “rational thinking,” Oleg Petrov, director for sales and marketing said at today’s event in Moscow.
Uralkali expects global potash sales this year may reach a record 58 million tons, reflecting “very good” demand, he said. This increased for the soil nutrient that strengthens crop roots should have an effect on prices, he said.
Uralkali reduced supplies railed to China to about 60,000 tons a month, on top of what it sells under contracts for seaborne cargoes as the Asian country’s spot market isn’t as beneficial as others. The Russian company was selling about 200,000 tons a month to China by the end of 2013, and has now diverted volumes to markets elsewhere in Asia, Latin America and Europe, Petrov said.
Uralkali signed a 700,000-ton seaborne-supply deal with China in January at $305 a ton, covering the first half of 2014. The producer expects talks on the next sea contract may start in September, with an agreement possible in the fourth quarter, he said.
While an April meeting between Dmitry Mazepin, billionaire owner of 20-percent Uralkali shareholder OAO Uralchem, and Belarus President Aleksandr Lukashenko could be viewed as the start of talks with Russia’s neighbor, it’s too early to discuss the terms under which the former partners may restore cooperation, Osipov said. Any future reconciliation would have to be beneficial to both participants, he said.
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