Potash: Next steps for Uralkali and BPC…

Developments in the Uralkali and BPC saga continue to attract headlines globally. Editor of the Profercy Potash Service, Tom Jago, assesses the latest developments below and the implications for the market.

Potash importers are nervous that scope for future reconciliation between Belarus and Russia could expose demand, until now heavily deferred, to higher price demands.

Russia, Uralkali ownership: Russia’s Onexim Group, controlled by Russian billionaire Mikhail Prokhorov has agreed to buy Suleiman Kerimov’s 21.75% stake in Uralkali, raising expectations that contingency plans for a joint-venture potash marketing group representing BPC and Urakali potash may be brought back on the front-burner. The sale of Uralkali to another investor is seen as a pre-condition for Belarus to free Uralkali CEO Vladislav Baumgertner (under arrest in Belarus since 26 August).

What it means for the market: Right now, not much. BPC and Uralkali are still strongly opposed in several markets, with sharp price competition visible. Going forward, it remains to be seen what conditions will be established for any joint-venture marketing group, if and where each side may be able to market MOP independently of each other, and where they would co-operate.

Joint marketing? Rumours of contingency plans already drafted for a Moscow-based joint Russia/Belarus potash marketing group have been in circulation since late October. It remains to be seen whether this would be equally acceptable to both sides. Last year, Uralkali and BPC set up a jv marketing company, Soyuzkali, in Switzerland. While Soyuzkali did not sell any potash, it was seen as a compromise vehicle to target certain markets, basis operations under independent, Swiss jurisdiction.

Buy-side reaction; exposure fear: Potash importers are nervous that scope for future reconciliation between Belarus and Russia could expose demand, until now heavily deferred, to higher price demands. One market with seen depleting inventories and slack import volumes during the last 6 months is China. Many other buyers are wondering if they missed the chance to pick up MOP (not SOP or NOP, which continue firm) at the low, opportunity prices from 2H 2013.

East Europe vs. other suppliers: Even if Uralkali and BPC eventually reunite, there is a substantial trust gap between East European and other suppliers over production rates and market discipline, that Uralkali and BPC felt was breached early in 2013. Uralkali has said several times in recent public appearances that it could switch back to a price-over-volume market approach at any time going forward if it felt market conditions and supply-side discipline across the board could be re-established.

The above analysis is edited from an edition of the Profercy Potash Service, published on 19 November 2013. The service offers daily news and weekly analysis across all major potash markets giving buyers an insight into the latest prices in key import markets both contract and spot. To request a free trial, or if you have any questions, please click here.