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Uralkali CEO Says No Talks to Resume Potash Marketing Pact With Belarus

Alexis Flynn / Wall Street Journal (US)

Russian potash giant Uralkali JSC has no plans to restore a sales partnership with Belarus, dimming prospects for reviving a global pricing cartel for the fertilizer ingredient.

Share prices of major potash producers in North America, Germany and Israel have rallied this year, partly on hopes that two of the worlds leading producers of the crop nutrient could be reconciled. But Uralkali Chief Executive Dmitry Osipov said in an interview there have been no talks since April and none are planned.

There are no negotiations going on at the moment with Belarus, with the BPC, said Mr. Osipov, referring to the Belarusian Potash Co., its trading partnership with state-run Belaruskali OAO that collapsed last summer.

Uralkalis decision to exit BPC ended an informal global-pricing cartel made up of BPC and North Americas Canpotex Ltd. that once controlled two-thirds of the worlds potash supply. The Russian miners move sent potash company stocks plunging last year, sparked a furious response by Belarus and landed the Russian companys former boss in a Belarusian jail.

Prices that averaged $400 a ton before Uralkali broke away from the BPC fell in the wake of the move, but have since begun to recover.

And prices didnt fall as low as some analysts had predicted, due in part to better-than-anticipated demand from Brazil and China. Uralkalis market-share recovery to 23% of global sales in the first half of 2014, up from 17% a year ago right after the breakup, also makes a deal with Belaruskali less pressing.

We sell through our own channels; they sell by their own, Mr. Osipov said of his former partner.

Prospects of a peace between Uralkali and Belarus appeared to gain traction when Minsk-born fertilizer tycoon Dmitry Mazepin became one of Uralkalis leading investors in December. Mr. Mazepin discussed the situation with Belarusian President Alexander Lukashenko in April in a meeting that Mr. Osipov described as quite positive.

Since then, however, there have been no further discussions, Mr. Osipov said. Restoring ties with BPC would raise a series of questions, he said. Under what conditions should we build this new marketing vehicle? Where should be the headquarters; what should be the proportion; what should be the aim; what should be the goal? There are no answers to these questions.

When Uralkali exited BPC, executives at North American potash producers predicted the partners would eventually resume their trading relationship. Then in August, Uralkalis CEO Vladislav Baumgertner was jailed in Belarus shortly after accepting an invitation from Mr. Lukashenko to try and resolve the situation.

Mr. Baumgartner was extradited to Moscow at the end of last year where he was placed under house arrest, after Uralkali bowed to Mr. Lukashenkos demands that the firm get new controlling shareholders.

Mr. Osipov said Mr. Baumgartner was released in Moscow two weeks ago. He said he had met with his predecessor, but it was too early to discuss whether Mr. Baumgartner could return to the company in any capacity.

Global hunger for greater crop yields helped the potash market defy expectations that the European cartel breakup would depress prices as low as $300 a ton. Brazil, hungry for potash to feed its huge sugar-cane fields, recently agreed to pay Uralkali $380 a ton for shipments of the crop nutrient, said Oleg Petrov, Uralkalis director of sales and marketing.

Mr. Osipov said Uralkali has since revised its expectations for global demand for 2014. We believe the total consumption for this year will be 58, 59, maybe even 60 million tons, said Mr. Petrov. Uralkali had previously estimated demand of 56 million to 58 million tons.

China, a key Uralkali customerand investor, after the countrys sovereign-wealth fund took a 12.5% stake in the company last Septemberwas one of main regions where the Russian company was able to claw back market share, largely at the expense of Canpotex, said Mr. Petrov.

Canpotex Ltd. lets its memberscurrently Potash Corp. of Saskatchewan Inc., Calgary, Alberta-based Agrium Inc. and Minneapolis, Minn.-based Mosaic Co.coordinate much of their sales, which helps them plan their own production as well, matching supply to demand to ensure stable profits.

Since January, the Russian railcars stuffed with potash crossing Chinas northern border have included fresh deliveries agreed upon quickly after the BPC breakup. Mr. Petrov said Uralkalis relationship with China had been very positive since the split, but added that the company wouldnt go soft on prices.

China will buy this year, and we think that China will pay a high price, said Mr. Petrov.

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