Even potash fertilizers reckonings make long friends

April 22, 2016 18:31

On May 20th, the OJSC Uralkali principal shareholder Suleiman Kerimov visited Belarus.

Potash fertilizers export is Belarus’ main hope to ensure exports’ growth in 2013. The uncertainty with supplies in Q3 and Q4 2013 forces the Belarusian authorities to seek for support in Russia. However, Russian partners prefer not to be bound by the restrictions and guard own interests, despite Belarusian leadership hopes.

The Belarusian government was not prepared for the reduced demand in the international markets. In Russia, the demand for the Belarusian mechanical engineering products, tractors, trucks, harvesting machines has reduced significantly. Tractors’ deliveries fell by 37%, trucks by 55% in Q1 2013 compared to the same period in 2012. In general, only few exports are growing, potash fertilizers is the key one. In Q1 2013 potash exports increased by USD 90 million up to USD 609.6 million.

In Q1 2013 China was the main buyer of Belarusian potash fertilizers. In early 2013, Belarus signed a contract with China to supply one million tons of potash, of which 300 thousand tons were an option which could be sold by Chinese companies. In Q1 2013 480 thousand tons were delivered, note that within Belarusian Potash Company, Russia also supplied potash to China. Prospects for a new contract are vague. By early Q2 2013 when the main fertilization period finished, China already had substantial potash fertilizer reserves. Other large markets include India and Brazil, but they do not demonstrate significant growth in potassium chloride consumption. Given the circumstances, Belaruskali needs to coordinate its actions with other potash fertilizers producers when negotiating volumes and prices of fertilizers’ supplies with other buyers.

Allegedly, harmonization of positions in the upcoming negotiations with potash fertilizers’ buyers was the main purpose of Uralkali’s owner visit to Belarus. On May 24th media reported, that as a result of the negotiations, a joint trader – Soyuzkali may start operations not earlier than Q2 2014, although previous agreement was to finalize formalities with Soyuzkali by mid 2013. In addition, Uralkali announced that it had no plans to sign a new contract with China until November - December 2013. The Belarusian side cannot afford this.

The differences between Russia and Belarus within Belarusian Potash Company have been around a long time. Uralkali preferred not to limit its supplies only within the BPC, and created the Swiss ‘subsidiary’ Uralkali Trading (UKT). By late 2012 78% of Uralkali exports were carried out through UKT, which made its Belarusian partner angry and forced the latter to take reciprocal moves – allowed companies, other than BPC, to supply potassium chloride. Uralkali makes it clear that the main reasons for its actions were their inability to control the BPC and the U.S. sanctions against the Belarusian leadership.

Thus, Belarus’ persistent demand for favourable terms within BPC resulted in Uralkali’s independent action straightaway. The expediency of the new trader - Soyuzkaly is unclear, since Uralkali already has an alternative trader and intends to make own decisions without consulting with Belarus.