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Uralkali Says Its Mine Flooding Wont Balance Potash Market

Yuliya Fedorinova and Andrey Lemeshko / Bloomberg (UK)

(Bloomberg)  PAO Uralkali, the worlds largest potash producer last year, said flooding at its Solikamsk-2 mine wont be enough to balance the $20 billion market amid oversupply.

Practically each large miner announced plans to keep or increase sales volumes this year compared to 2014, Chief Executive Officer Dmitry Osipov said in interview in Moscow on May 8. Its only possible to avoid market turbulence if production is cut.

Uralkali expects global demand for the nutrient to decline by 6 percent to 8 percent this year from a record 63 million metric tons in 2014, when farmers in Brazil, China and North America increased consumption.

The Russian miner increased its contract price with India by $10 to $332 per ton this month amid demands for a freeze, according to Osipov. Uralkali said there has been a decline in the spot market since the end of the first quarter after Belaruss deal with China, the worlds largest consumer.

In North and South America, the situation looks the most unstable now as the large volume sales at the start of the year led to significant price drop, Osipov said. In Brazil due to the aggressive policy of some rivals, prices dropped by $50 per ton, he said.

Uralkali plans to produce 10.2 million tons of potash this year, but said last month it may review that target depending on markets and the situation at Solikamsk-2. The outlook for the mine will be clearer by the end of June when the spring water ends, according to Osipov.

Stanching Inflows

The company is using clay and cement to cut water inflows and has also enforced the concrete wall that divides the flooding mine from Solikamsk-1.

There is no threat to the underground mine complex of Solikamsk-1 at the moment, he said.

Uralkali used to export its potash jointly with Belaruskali until the end of July 2013, an arrangement that helped the companies to control global prices. There are no talks to renew this venture, Osipov said.

Uralkali sold a record 12.3 million tons of potash last year.

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