Russian minister says China conducting probe into Uralkali

10.11.2015
Reporting by Polina Devitt; additional reporting by David Stanway and Natalia Shurmina; editing by Jason Neely / Reuters (UK)

The anti-monopoly bureau of China’s Ministry Of Commerce is conducting an investigation into Russia’s Uralkali, the world’s top potash producer, Interfax news agency reported on Tuesday, citing Russian Economy Minister Alexei Ulyukayev.

The news of the investigation comes a month before China, the world’s largest consumer of the crop nutrient, and Uralkali are expected to start talks on their new supply contract for 2016.

“We discussed this (investigation) with my Chinese partner. I drew his attention to that. He promised a fair decision on this question,” Ulyukayev told reporters in Beijing, where he attended an inter-governmental trade commission meeting.

“The attitude is positive. I expect that we will settle this issue,” he was quoted by Interfax as saying.

Ulyukayev said that the investigation was being conducted into Uralkali and its trading subsidiary in Beijing, but did not provide further details.

In 2011, the Chinese competition authorities approved a merger of Uralkali and its Russian peer Silvinit after Uralkali made several voluntary undertakings.

Under these concessions, the company said in 2011, it would continue to follow the established sales process to China, supply traditional types of product and would “continue to respect the traditional negotiation procedures and take account of the historical and current trading situation with respect to Chinese customers”.

Its subsidiary in Beijing was set up in 2013 to promote Uralkali’s business in China by buying potash from Chinese importers and further directly distributing it to end customers, according to its website www.uralkali.com.

Uralkali declined to comment on the investigation. China’s Ministry of Commerce did not response to a Reuters request for comment.

Uralkali’s talks with China on next year’s supply contract are expected to start in December, the company’s press service told Reuters. The global potash market has been hit by weak demand this year.

Shares in Uralkali did not react on Ulyukayev’s comment in Moscow on Tuesday and were down 0.2 percent, in line with the broader market decline.

The Russian company may face a fine of between 1 and 10 percent of the revenue it received from the Chinese market in 2014, or not more than $70 million, if Chinese anti-monopoly law was violated, Oleg Petropavlovskiy, an analyst at BCS investment bank, said in a note.

Uralkali’s total earnings before interest, taxation, depreciation and amortisation (EBITDA) were at $933 million in the first half of 2015. (Reporting by Polina Devitt in Moscow; additional reporting by David Stanway in Beijing and Natalia Shurmina in Yekaterinburg; editing by Jason Neely)

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