Farmers & Investors Eye Uralkali Developments Closely
Reports have been surfacing that Russia’s Uralkali is going to restore its partnership with Belarus’s Belaruskali and market potash via the Belarusian Potash Company (BPC). The reason for this is, the Russian ambassador to Belarus Alexander Surikov, has told a news conference on Friday that Uralkali is ready to restore cooperation with Belaruskali.
After Uralkali’s bombshell that they are going ‘solo’ in July much has taken place in the potash market and a future partnership reforming may be bad news for farmers. In the past six months, North America’s potash marketing arm Canpotex has been very worried as some of its members saw a drop in share prices as much as 25%. Saskatchewan based PotashCorp has reduced its workforce by 18% and cut back mine production.
Let’s look into what took place on the other side of the world. Uralkali’s CEO Vladislav Baumgertner was arrested in Minsk and then extradited to Russia. Russian tycoon Suleiman Kerimov sold his 18% share in Uralkali to Russian billionaire Mikhail Prokhorov’s investment arm ONEXIM. Belarus’s President Alexander Lukashenko has sent negative signals to the Russian government and diplomacy beyond measure has been displayed from the Kremlin. Uralchem, the world's second largest ammonium nitrate producer has become a shareholder.
If Uralkali and Belaruskali reunite, the control of 40% of the world’s potash market will be in their hands and Canpotex in the west will have just below that resuming the global potash oligopoly. There will surely be a period of more volatility before prices rise but it depends on what prices contracts are agreed upon especially in China and India. Farmers would tend to buy fertilizer and stockpile before the rise begins. The manipulation of potash prices by such cartels is very probable in the future if the situation continues as present. The only light at the end of the tunnel for farmers are years’ ahead providing BHP Billiton quickly completes with the Jansen project and off-sets the price-over-volume paradigm.
For a detailed analysis on the initial split of the BPC, please see my related article, click here.
