UPDATE 2-Russia's Uralkali quits top potash cartel, sees global price fall
Tue Jul 30, 2013 4:30am EDT
* Uralkali pulls out of Belarus venture after "deadlock"
* Leaves Canpotex as world's top potash exporter
* Expects prices to fall to $300 a tonne from $400 a tonne
* Uralkali's shares plunge 15 pct
By Polina Devitt and Natalia Shurmina
MOSCOW, July 30 (Reuters) - Russia's Uralkali has dismantled one of the world's largest potash partnerships by pulling out of a venture with its partner in Belarus, a move it expects will cause global prices to plunge by 25 percent.
The break-up of the Belarus Potash Company (BPC) leaves North America's Canpotex as the ruling potash export venture. BPC and Canpotex had accounted for 70 percent of global trade in potash, an important ingredient for fertilizer, and the duopoly had set identical prices in key markets such as China and India.
Uralkali said it was pulling out after reaching "deadlock" over sales and would export all potash via its Swiss-based Uralkali Trading.
The decision may lead to a fall in the global potash price to below $300 per tonne in the second half of 2013, from the current $400 per tonne, it said. Lower fertilizer prices could result in rising demand from price-sensitive farmers in Asia.
Shares of Uralkali plunged 15 percent. Rival fertilizer firms also fell, with Germany's K+S down nearly 16 percent.
Uralkali and Belarus potash maker Belaruskali were partners for eight years in BPC, which accounts for 43 percent of the global potash export market. Uralkali said it had left the venture because Belaruskali made a number of key fertilizer ingredient deliveries outside the partnership.
The break-up of the venture means Belaruskali can now sell its potash at a discount, said Dmitry Ryzhkov, equity sales trader at Renaissance Capital.
"It is as if Saudi Arabia decided to leave OPEC - oil prices would fall immediately," Ryzhkov said.
It leaves the Canpotex partnership - which unites Potash Corp of Saskatchewan, Agrium and Mosaic - as the world's largest potash exporter.
The duopoly had also been threatened by miner BHP Billiton's plans for an 8-million-tonne-per-year mine in western Canada, which would be the world's largest potash mine if it opens as scheduled in 2017.
Potash enhances water retention of plants, and increases crop yields.
DEADLOCK
Uralkali chief executive Vladislav Baumgertner said in a statement the partners had reached an unfortunate "deadlock".
The company will now focus on increasing sales.
"In the near future we expect (global) competition to become stronger - that will push prices down," Baumgertner told reporters in a conference call on Tuesday.
"This decision came as a surprise for us," a top manager of Belaruskali, who asked not to be identified, said.
Belaruskali declined official comment. Uralkali's CEO said the company had informed Belaruskali verbally on Monday and then formally on Tuesday. BPC was not available for immediate comment.
Uralkali plans to boost its potash sales to 13 million tonnes in 2014 and 14 million tonnes in 2015 from 10.5 million tonnes in 2013, Baumgertner said. The company will try to expand its market share in China, India and Brazil.
It has concluded an option agreement with CNAMPGC, a major Chinese fertiliser importer, on potash supply, Uralkali said. This would aim to supply 500,000 tonnes of potash to China by the end of 2013.
Uralkali said it hopes that increase in sales volumes would compensate for the expected fall in the potash price, allowing it to keep its current dividend policy.
The company expects its shares and those of other producers to be volatile in the near future and has decided to freeze its current buy-back programme, the CEO added.
"Then there was a woman, a lion of a woman."
