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PotashCorp Veteran at EuroChem Challenges Uralkali With Russian Mines #potash

Potash Corp. Veteran Challenges Uralkali With Russian Mines
By Yuliya Fedorinova Sep 8, 2014 8:37 AM CT
OAO EuroChem, a Russian fertilizer maker building $7.4 billion of potash projects, is gearing up to challenge the dominance of OAO Uralkali with production from its two mines reaching the market in five years.
“We expect we’ll be able to mine the first potash at both mines in late 2017,” Clark Bailey, EuroChem’s mining head, said in an interview. About two more years will be needed to start shipments to external customers, he said.
EuroChem is developing an annual capacity of 8.3 million metric tons of potash, a form of potassium that strengthens plant roots, in two phases at the Verkhnekamskoe deposit in the Perm region and in another two at the Gremyachinskoe deposit in the Volgograd region in western Russia. The company controlled by billionaire Andrey Melnichenko kept its pace even as Uralkali plunged the $20 billion market into turmoil in July last year by ending a marketing venture with Belarus that accounted for 40 percent of worldwide potash exports.
EuroChem, which already produces nitrogen and phosphate nutrients, plans to consume a portion of the potash itself to boost its output of complex fertilizers. Even as it bets on cost advantages such as proximity to a port to take on market leaders, the key to EuroChem’s success in potash could lie in the efficiency of suppliers such as K+S AG (SDF), Europe’s largest.
Market Share
“While EuroChem’s projects are the only ones at an advanced stage in the industry globally, they’re more likely to take market share from high-cost producers like K+S than from low-cost producers like Uralkali,” ZAO Raiffeisenbank analyst Konstantin Yuminov said by phone.
Uralkali’s press service declined to comment.
Global potash capacities will exceed 90 million tons in 2020, while deliveries will top 60 million tons, Uralkali said in a July presentation.
EuroChem is certain the market will be “at least better, not worse than now” by 2019 as prices are recovering and demand is healthy, said Bailey, who joined EuroChem last year after 16 years at Potash Corp. of Saskatchewan Inc. (POT)
Canpotex Ltd, which exports potash for Potash Corp., Agrium Inc. (AGU) and Mosaic Co., last week agreed on sales to Brazil at $380 per ton for October deliveries, up almost 20 percent from the end of last year, according to researcher Argus FMB.
Three Shafts
Bailey, who hails from Texas, oversaw all four of Saskatoon, Canada-based Potash Corp.’s C$7 billion ($6.4 billion) expansion projects at Cory, Allan, New Brunswick and Rocanville as senior vice president. He took charge after previous contractor Shaft Sinkers Holding Plc (SHFT) failed to properly place the cage at the VolgaKaliy project in Gremyachinskoe, delaying the project for more than two years.
The project is on course now and is progressing at 30 to 45 meters every month at each of the three shafts, Bailey said. The second shaft is at a depth of 773 meters and work is advancing on the main processing mill and other facilities.
At the Usolskiy project in Verkhnekamskoe, EuroChem finished sinking both the first two shafts about two weeks ago, Bailey said. Work on the main process mill has yet to start.
“We have lower cost of construction per ton of potash capacity than is needed to get a return on investments,” Bailey said. “Given that we have a port at the Black Sea, we think that VolgaKaliy will be able to offer a very competitive price. It is well-positioned to ship potash to Europe or Latin America, including Brazil. Probably Uralkali will have to change some of their strategy and revisit their markets.”
Syndicated Loan
EuroChem, which is using its own cash, has last week secured $750 million financing from a group of mostly international banks to develop the project in the Perm region even as the U.S. and Europe promised new penalties to Russia over crisis in Ukraine.
“We are not currently affected by the current geopolitical situation so far in terms of getting funding, although we monitor and watch the events, developments, consequences closely,” Bailey said.
Building mines in Russia is easier than in Canada or the U.S. because the surroundings are also developed for the needs of the workers, Bailey said.
In Kotelnikovo, at the site of VolgaKaliy, EuroChem has built apartments, cinemas, hotels, playgrounds, clinics, gyms and cottages. The area is a three-hour drive from Volgograd.
The Usolskiy project is located in Berezniki, an area where Uralkali has been mining for potash for decades. Social infrastructure is therefore developed in the area, and EuroChem has the added advantage of attracting employees from Uralkali.
“The construction site is on a very hilly area,” Bailey said. “So the site is terraced, and we are now finishing preparation works for this terracing and leveling to begin major building construction.”
Transferring Workers
For VolgaKaliy, EuroChem has transferred workers from its Kovdorskiy GOK phosphate rock mining unit and drawn from various mining companies in Russia. It is also hiring from Belarus and Kazakhstan.
“In Russia, mining companies are literally building cities to attract employees,” he said. “In the U.S. and Canada, miners say: We have the mine, let the rest of it come itself. In Saskatchewan, in the remote areas, you need to build a labor camp.”
To safeguard its position, EuroChem bought a license for the Belopashnenskiy potash area at the Verkhnekamskoe deposit in June, increasing its reserve mining base to 60 years to 70 years from the current 35 years, Bailey said.
To contact the reporter on this story: Yuliya Fedorinova in Moscow at
To contact the editors responsible for this story: Will Kennedy at

K+S Saskatoon office is its new legacy #potash

6 Sep 2014
The StarPhoenix
K+S office is its new legacy
Signals company is ‘here to stay’
K+S Potash Canada’s (KSPC) new office on Wall Street is more than just a building, according to Ulrich Lamp.
“It demonstrates that we have arrived in Saskatoon and we are here to stay,” said Lamp, CEO of KSPC.
KSPC is part of the K+S Group, an international resources company that has been mining for 125 years.
Its solution potash mine, the Legacy project, under construction near Bethune will be the first new greenfield potash mine built in Saskatchewan in nearly 40 years.
Lamp said there was never any doubt where the company’s headquarters in Canada would be located.
“It must be Saskatoon because it is the headquarters of the potash world,” Lamp said. “Therefore as a potash company it was important for us when we come over to Saskatchewan to select Saskatoon as our headquarters.”
KSPC’s 100 employees in Saskatoon began moving into the 40,000-square-foot building this summer. The official opening was Friday.
The LEED silver certified building features a rooftop terrace, balconies on the second floor, indoor bicycle storage, lighting that dims and brightens depending on the natural light, windows that open and underground parking.
“A separate KSPC building is a great opportunity to display our signage and build awareness of our long-term presence in the community,” said Kim Poley, KSPC’s vicepresident of human resources and corporate services. “I believe the building and its special features will serve as a great recruitment and retention tool.
“For employees, I think this space is going to be so comfortable year-round and there is going to be so much opportunity for people to not just come here to work, but come here and enjoy the space and enjoy their day.”
Legacy project
Lamp said the Legacy project is on schedule.
Commissioning is targeted for the summer of 2016 and the company projects it will reach two million tonnes of production capacity by the end of 2017.
“Currently there are 1,200 people working on site (at Legacy),” Lamp said, adding KSPC recently opened a camp nearby that is housing about 650 people. “That number is expected to rise to 1,500 by the end of this year.”
Lamp said the potash industry is now starting to come out of the dip caused by the Russian/Belarus potash cartel split in the summer of 2013 that saw potash prices drop 25 per cent.
“The prices are now going up and the market is now in good condition,” he said. “The need for potash is still there and we are optimistic for the future.”

Saskatchewan keeps tabs on Canadian worker layoffs at Vanscoy potash job site

5 Sep 2014
Saskatchewan keeps tabs on Canadian worker layoffs at potash job site
REGINA — Saskatchewan’s immigration minister says he hopes employers act responsibly under Ottawa’s temporary foreign worker program, despite reports Canadian workers have been laid off from a potash mine job site.
Jeremy Harrison was commenting Wednesday after word that Alliance Energy Ltd., recently cut 58 Canadian employees from an expansion project at Vanscoy, southwest of Saskatoon.
Reports indicate temporary foreign workers were kept on the payroll.
Harrison says the provincial government has no control over the program, but is gathering information on a federal investigation into the layoffs.
Alliance is an employee owned company which provides electrical contracting and maintenance services throughout Saskatchewan.
The company has said it’s fully compliant with the federal program.

New EU sanctions final blow for Russian loans #potash #uranium

New EU sanctions final blow for Russian loans
Fri Sep 5, 2014 5:02am EDT
By Sandrine Bradley
LONDON, Sept 3 (Reuters) – EU proposals to ban syndicated loans to Russian government-owned banks and institutions will sink some European banks’ efforts to carry on lending in Russia and means that no Russian loans are likely to be signed in 2014, bankers said on Thursday.
Fresh EU sanctions, in response to Russia’s invasion of Ukraine, widen a ban on borrowing or raising capital in Europe to all Russian state-owned companies from just Russian government banks.
The proposals, which included a ban on all syndicated EU loans to Russian government-owned banks and institutions, were raised at a meeting of European Union ambassadors in Brussels on Monday.
EU governments will make a decision on the sanctions by Friday.
“If the ban goes ahead it will be the final nail in the coffin for the Russian syndicated loan market,” a European loan banker said.
If passed, the sanctions will kill the efforts of a small group of European banks with a presence in Russia that are motivated to keep lending to Russian companies to maintain their Russian business. [ID: nL6N0QD3BR]
US and Asian banks have shied away from Russian loans since March, but European banks with Russian franchises have tried to keep refinancing existing loans, including a $425 million loan for Russia’s largest steel maker Evraz, which signed last month.
Russian fertiliser company Eurochem managed to sign a $750 million, eight-year project financing for its Usolskiy potash project last Friday before the new EU sanctions were discussed on Monday
The non-recourse project financing was provided by Russian banks Rosbank and Sberbank, along with Credit Agricole CIB, ING, Societe Generale and Unicredit, which have a presence in Russia, and HSBC.
Russian nuclear company Techsnabexport (Tenex) may not be as lucky and could be an early victim of the new sanctions, along with a potential new loan for oil giant Gazpromneft.
Deutsche Bank is co-ordinating the loan for Tenex, which was one of a handful of syndicated loans for Russian companies that were still moving forward despite the existing EU and US sanctions. It approached banks seven months ago for a $500 million new-money loan before Russia annexed Crimea.
Bankers were confident that Tenex’s loan would be completed as recently as Monday, when a bank meeting was held in Moscow, but are now saying that it will be cancelled if the new EU sanctions are adopted.
“Tenex has not yet been executed or funded so if there is an outright ban on syndicated lending it will not get done,” the European loan banker said.
Tenex was not immediately available for comment.
Gazpromneft sent a request for proposals to banks last month for a new five-year loan, which is also unlikely to happen if the EU sanctions are passed, bankers said.
Gazpromneft could not immediately be reached for comment.
Although the new EU sanctions address syndicated loans explicitly for the first time, the loan market has effectively been closed to Russian borrowers since May, as US sanctions started to bite.
“The syndicated loan market is effectively shut. There will be no new deals until the New Year,” a second banker said.
The market slow down could however last longer as international banks start to scale down their lending operations in response to a dramatic drop off in business.
“There will be no new business for a year minimum,” a third banker said.
Russian borrowers could face higher borrowing costs as they are forced to rely on more expensive loans from Russian banks, rather than cheaper dollar or euro-denominated loans from international banks, which have been their preferred funding option.
“Russian borrowers are going to Russian banks now for funding rather than having to endure painful and lengthy discussions with Western banks,” a fourth banker said.
Russian borrowers are also switching to bilateral loans, which are smaller, more private loans between borrowers and individual banks. (Editing by Tessa Walsh)

Overview Update: Learn More About PotashCorp and Its Industry #potash

SEP 3 2014

Overview Update: Learn More About PotashCorp and Its Industry

Website is at –


Updated in August 2014, our Overview of PotashCorp and Its Industry offers a snapshot of the factors that influence our company’s performance. On the site, users will find graphs, interactive tools and discussion in both online and printable formats. Our Overview provides insight into our nutrients, markets and potential.
What users will find:
Introduction Learn about PotashCorp and our key business strategies
Fertilizer 101 Updated content on key demand drivers for agricultural and fertilizer markets
Nutrients Learn the essentials of N, P and K including key characteristics, supply & demand dynamics and market outlook
Advantages Discover what we believe makes PotashCorp unique amongst its peers
Resources Helpful information including conversion terms, nutrient facts and more
Beyond these topics, we encourage you to visit the site to utilize our interactive tools!
Looking for data on crop production or a specific market? Try out our Crop and Market Tools designed for users to take a more in-depth look into key crops and markets for N, P and K.
Looking for a specific graph or topic? Try out our Filter Tool created to help users find the information they need more easily.

PotashCorp.: A Victory Lap That Is Well Deserved #potash

Potash Corp.: A Victory Lap That Is Well Deserved

Sep. 4, 2014 10:31 AM ET



Disclosure: The author is long POT, KPLUY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. (More…)


  • Potash Corp. currently trades at $35.
  • The potash company has substantially rebounded after the sector meltdown last year and actually returned to pre-crisis levels in June 2014.
  • Excellent long-term fundamentals and a dip back to the $35 region make Potash Corp. a Strong Buy once again.

Just about a year ago, at the end of July 2013, Uralkali (OTC:URALL) announced that it would leave the Belarusian Potash Company, a joint venture with Belarussian partner Belaruskali, in order to pursue a volume-over-price strategy. The industry structure in the potash market is oligopolistic and with Uralkali announcing its exit from the cartel, investors quickly panicked about falling prices in the potash market.

As a result of Uralkali’s announcement, shares of potash companies were thrown under the bus and immediately traded at distressed valuations. Potash Corp. of Saskatchewan (NYSE:POT), for instance, a major player in the global potash business, lost 25% of its market capitalization as a result of Uralkali’s unsubstantiated supply announcement in a matter of days last year.

I have quite aggressively recommended Potash Corp. after the sell-off last year as well as The Mosaic Company (NYSE:MOS) — original thesis here and here — and even suggested, that both companies could return to pre-crisis price levels once the dust in the sector settled.

For instance, at the beginning of February 2014 I have asserted, that shares of Potash Corp. will very likely regain their strength as investors will shift their focus away from short-term pricing uncertainty in the potash market and toward the favorable long-term value proposition Potash Corp. makes. I wrote:

Hefty share price declines oftentimes define the beginning of a slow and gradual recovery trend and it was of no real surprise that potash companies rebounded nicely in the second of half of 2013 and the beginning of 2014. Now, share prices of potash firms are correcting once again which I attribute to an overall profit-taking mentality in the marketplace. However, long-term investors can still find a decent bargain in Potash Corp. of Saskatchewan over the next two or three years and I have repeatedly argued that I expect shares of potash firms to climb back to pre-crisis levels (in the case of Potash Corp. this would imply a target price north of $38 per share).

It was quite clear at the time, that investors’ actions were completely driven by irrational fear and I also pointed out that a variety of industry CEOs strongly disagreed with the downward revisions of analyst target prices as a result of Uralkali’s shift in strategy.

Specifically, I wrote:

The recent market turmoil has the characteristic of indiscriminate panic selling and provides great opportunity for investors/shareholders who want to snatch up shares when they are on sale. There is more than a slight chance that the general investing public exaggerates the implications of Uralkali’s announced supply increase. This logic gains weight with reference to the above mentioned statements from K+S, Passport and Potash Corp. While basic economics dictate that increased supply will lead to lower prices, the degree to which profitability will be impacted remains unclear. In addition, potential pricing impacts are openly contested by the firms in the arena. I take the statement from K+S and Passport Potash as confirmation that inside players also disagree with the ensuing hysteric market reaction. As such, I follow Warren Buffett’s precise judgment to “be greedy when others are fearful”. There is no fundamental reason to believe the industry will go down.

As potash companies appeared to quickly bottom out after panic selling last year, I also recommended a lower-risk alternative to all-in potash firms: K+S (OTCQX:KPLUY), a German potash company with a sizable salt business that helped mitigate concentration risk and which has become my largest position in the fertilizer sector.

Fast forward one year and share prices of potash companies, including K+S have solidly recovered — as expected. The share price of Potash Corp., for example, actually reached $38 in June and indeed recovered all of its losses sustained during the sector meltdown. A great lesson in contrarian investing it was.

Chart situation After marking a 52-week High at $38.58 in June, shares of Potash Corp. have consolidated back to the $35 region where they now offer another interesting investment opportunity for long-term minded investors.

PCS victory lap 1


Fundamentals remain intact Little has changed with respect to my outlook for Potash Corp. and I am reaffirming my positive stance on the company due to solidly intact fundamentals:

  • Land for agricultural use remains limited.
  • The world population is growing.
  • Emerging markets require higher crop yields to feed a fast-growing local population.

These fundamental long-term drivers of Potash Corp.’s business are unlikely to change any time soon. In fact, the company raised its guidance on global potash demand in China and North America for 2014 as part of its second quarter earnings release in July

PCS victory lap 2

(Source: Potash Corp. Second Quarter Earnings Presentation)

Conclusion Potash Corp. remains an excellent long-term bet on rising fertilizer demand driven by population growth and increasing pressure on the food supply chain. I think an investment in Potash Corp. is particularly suitable for long-term investors who want to buy an industry leader at a time when pricing uncertainty still exists in the potash market.

Potash Corp. is a textbook contrarian investment example that I believe has further potential to run. If earnings and cash flow continue to improve, which I expect over the medium-term, higher share prices and new 52-week Highs are only a question of time. Bullish thesis reiterated: Long.

Editor’s Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Potash miners face over-supply threat of their own making #potash

Potash miners face over-supply threat of their own making
By Rod Nickel
WINNIPEG Manitoba Thu Sep 4, 2014 7:59am EDT
WINNIPEG Manitoba (Reuters) – A pickup in fertilizer demand has brightened the outlook for North American potash companies who suffered through plunging prices and profits after a European trading consortium collapsed in 2013.
But any celebration among investors may be premature.
A surplus of potash mining capacity is set to grow even larger in coming years, weighing down the global industry while favoring low-cost eastern European producers over North American miners, who are sticking to a marketing strategy that risks falling behind the times.
And the times are changing. Belarusian Potash Company (BPC), the counterpart to North America’s potash trading consortium Canpotex Ltd, collapsed a year ago, with one partner looking to increase volumes rather than limit output and hope for higher prices.
The first new mines in Western Canada in four decades are also under construction and would be fierce rivals to Canpotex partners Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc.
This year, global capacity will hit 82 million tonnes, but demand will fall well short, even at a record-high level of 57 million tonnes, according to London-based commodity research firm CRU. That gap is set to widen slightly by 2020, when capacity looks to reach 99 million tonnes, far more than is needed to meet demand of only 73 million.
CRU’s demand forecast is based on an assumption that demand will grow faster than it has in the last seven years. If it does not, the supply-demand gulf will grow even wider.
“I’m more worried still about the industry,” said Philippe Capelle, vice-president of equities for Standard Life Investments, which holds shares in Potash Corp and Agrium and likes the companies.
“You’ve had a bounce-back in volumes this year in potash. Do you get a bounce-back next year? Maybe not and then what happens? You still have plenty of supply, so why would the pricing go up?”
Potash Corp shares have risen 28 percent since late July 2013 through Tuesday to trade back around their level before BPC’s collapse that month. But the Toronto-listed stock’s price around C$38 is less than half its record-high value reached during the 2008 commodities boom.
Canpotex is sold out of potash for the current third quarter. But much of that recovery is due to pent-up demand caused by North American railway problems that temporarily stifled the flow of potash.
“You can only restock the cupboard once,” cautioned Scotiabank analyst Ben Isaacson, in a July 24 note.
Potash was an investor darling six years ago on the logic that global population and income growth would drive up grain production.
One by one, producers expanded, starting with Potash Corp more than a decade ago. But fertilizer prices collapsed during the financial crisis, along with other commodities.
Through the ups and downs, North American potash producers flexed their market muscle by idling production to boost prices when demand slumped. But some say changing times calls for a new approach.
“The potash industry needs to take a more pragmatic (approach) to price versus volume, otherwise demand will continue to stagnate and the capacity surplus will be unsustainable,” said CRU analyst Paul Burnside. “It needs to price potash to move, without getting into a price war.”
New Potash Corp Chief Executive Officer Jochen Tilk says he plans no “radical changes” in strategy.
By contrast, after quitting BPC, Russia’s Uralkali OAO focused on driving up volumes. It says it pushed its market share to 23 percent in 2013 from 17 percent in the first half of that year, mostly at the expense of Canpotex, which still holds a larger share of the market.
“Is price over volume the right strategy if you lose market share? I don’t have the answer,” said Standard Life’s Capelle. “You’re not in an oligopolistic environment anymore.”
But Mosaic CEO Jim Prokopanko said shareholders are best served by the traditional Canpotex model. Like Potash Corp, Mosaic has shut in capacity.
“We’re not going to try to sell more product than what the world requires,” he said.
If Germany’s K+S AG and Anglo-Australian miner BHP Billiton complete their Canadian mines, the new North American players will also have to weigh supply and demand, Prokopanko said.
“I think they’re going to be good business stewards, look after their investors’ capital and they’re not going to be crazy about this,” he said.
Yet low-cost Russian producers are less worried about adding supply to the market. One of the reasons Russia’s EuroChem is confident about building two mines by 2017 is that it expects Potash Corp to limit its production if prices dip too low.
“This is one of the considerations, yes – that big incumbent players including (Potash Corp) are likely to pursue price over volume,” said Andrey Ilyin, EuroChem’s finance director, in an email.
Some shareholders are confident in the existing strategy. Favoring price over volume helps preserve Potash Corp’s margins, said Mohsin Bashir, portfolio manager at Stone Asset Management.
But it may be hard for Potash Corp to drive a higher price without a clear competitive advantage, he added.
Ultimately, any marketing strategy must consider what farmers are willing to pay for potash, said Gene Gauss, vice-president of fertilizer and nutrition at Wilbur-Ellis, a U.S. retailer that buys potash from the miners.
He thinks Potash Corp may eventually be forced to pursue a closer balance between volume and price as competition increases.
“I think they’ll have to … It’s just, in this industry now, it’s hard to determine anything in the future based on the past.”
(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Jeffrey Hodgson and David Gregorio)

Russia’s Eurochem secures $750 mln loan from European, Russian banks for potash project #potash

Russia’s Eurochem secures $750 mln loan from European, Russian banks
MOSCOW, Sept 4
Thu Sep 4, 2014 5:53am EDT
MOSCOW, Sept 4 (Reuters) – Russian fertiliser maker Eurochem has signed a $750 million, eight-year credit facility with a syndicate of Russian and foreign banks to finance a potash project at one of the world’s largest deposits.
A syndicate made up of Europe’s Credit Agricole, HSBC and ING, and Russian counterparts, Rosbank and Sberbank, agreed the loan, which was in the pipeline before the crisis in Ukraine prompted many Western lenders to shun Russia’s loan market.
Eurochem, Russia’s third-largest fertiliser maker, said late on Wednesday the money would be used to develop its Usolskiy potash project in the Perm region in central Russia, which will have total annual capacity of 3.7 million tonnes once a second development phase is completed.
Western debt and equity markets have been largely closed for Russian companies after the United States and European Union imposed sanctions on Russian businessmen, companies and state-run banks over Moscow’s support of an uprising by pro-Russian separatists in Ukraine.
Steelmaker Evraz, which along with Eurochem does not feature on any U.S. or EU sanction lists, signed a $425 million syndicated loan in August, but secured less than it had sought as U.S. banks stayed away from the syndicate. (Reporting by Alessandra Prentice; Editing by Mark Potter)

Fire at PotashCorp Cory mine

Fire at PotashCorp Cory mine

No one hurt after blaze on the third floor of a building at mine

Reported by Trelle Kolojay

First Posted: Sep 3, 2014 6:23am | Last Updated: Sep 3, 2014 7:12am

A fire Tuesday night at the PotashCorp Cory mine southwest of Saskatoon had Saskatoon fire trucks rushing to the scene.
The Saskatoon Fire Department received a 911 call from the mine just before 10 p.m. Tuesday night.
When they arrived, PotashCorp fire crews were already throwing water on the third floor blaze, but the Saskatoon aerial truck came in handy to get above the fire and put out spot fires on the roof.
The Saskatoon Fire Department said the fire started above the scrubber room which is part of the potash drying process. Heat and stream from drying potash in that room is expelled through a large exhaust stack.
The fire was out after about 40 minutes.
No one was hurt and damage estimates are not in yet.

Potash: Come back Vlad, all is forgiven #potash

Potash: Come back Vlad, all is forgiven
Frik Els
August 28, 2014
In July last year Uralkali CEO Vladislav Baumgertner blasted the global potash market wide open sending stock prices in the sector tumbling and projects back to the drawing board.
Baumgertner’s breakup of the Belarus-Russia potash bloc – which cost him his job and some jail time – was supposed to move potash from a clubby system of tightly controlled global supply and set prices to an open market where volume and cost-based pricing is key.
Baumgertner, who is still under house arrest and the subject of a criminal investigation, forecast at the time the price of potash would fall 25% to below $300 a tonne in short order.
Fast forward 12 months and while Belaruskali and Uralkali may still patch things up, it seems Baumgertner’s big move is playing out more or less as predicted.
According to the latest commodity price index from Canada’s Scotiabank global shipments of the soil nutrient rebounded significantly this year.
Better still, after the swift drop on the Baumgertner bomb, prices are also creeping back up.
According to Scotiabank economist Patricia Mohr buyers have been making the most of lower prices and global potash deliveries could be on the high side of expectations, surging 7% to 58 million tonnes.
Shipments have been boosted by strong sales in North America, record fertilizer application in Brazil — linked to higher soybean plantings and robust coffee prices — and a modest pick-up in demand from palm oil growers in Malaysia and Indonesia.
At the same time spot potash prices (FOB Vancouver) edged up from $302.50 in June to $310 per tonne in July, after bottoming at $295 in January.
Granular potash — preferred in Brazil — is in short supply, as is all grades of SOP (potassium sulphate, non-chlorine potash fertilizer). Brazilian potash imports surged by 26% to a record 4.6 million tonnes during the first half of the year, though Mohr believes aggressive pricing by Uralkali probably contributed to this strong demand.
The net result according to the report is that producer inventories across North America fell 18% below the five-year average in June.
The rest of the year is looking even better.
China will exercise a large amount of optional tonnage from Canada in the second half and Canpotex, the North American marketing and distribution arm of the big three producers, and top producer Potash Corp (TSE:POT) have announced that they are sold out this quarter.
Granular prices in Brazil may increase from the current $355 – $360 to $380 CFR, given strong seasonal demand in the third quarter.
However notes the report, broad-based price increases may await negotiation of a new contract price with China for early 2015 — widely expected to be a 10% hike on today’s $305 CFR China price — setting a new higher floor.
Potash is currently priced well below phosphate fertilizers, which are strengthening. Sulphur prices, used to make DAP fertilizers, have been on a tear, rising to $155 at the Vancouver port in July. That’s up 18% compared to the previous month.
Uralkali expects global potash shipments to climb to 60 million tonnes in 2015, though this may be optimistic given softer crop prices and weaker farm economics, concludes the report.
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