BPC and Uralkali’s divorce: first performance results

Category status:
April 22, 2016 18:38

On October 3rd, Uralkali summed up its performance results in Q3 2013.

The divorce between BPC and Uralkali has had a diametrically opposite effect on the companies’ performance results. These results suggest that all the work in the BPC was mainly carried out by Uralkali representatives. It seems that it will be extremely difficult for Belarus to recover its sales without a common sales network with Russia.

In Q3 2013 Uralkali produced 2.7 million tons of potassium chloride, which is 4% more than in 2012. The company is operating at almost full capacity. Potash sales in August and September totalled 1 mln tons. In Q3 2013 Belaruskali produced about 1.4 million tons and its production was decreasing with each passing month. According to estimates, in Q4 it will produce 0.9 million tons. In Q1-Q3 2012, Belaruskali produced 2.1 million tons, and in Q4 1.4 million tons.

After the split between BPC and Uralkali, Belaruskaliy reduced production and experienced problems with sales, while Uralkali increased production and the volume of sales, threatening to push its Belarusian competitor off the foreign markets.

The companies’ performance results mean the following. The sales policy was in the hands of Uralkali. Belarusian BPC representatives performed an exclusively representative function and had no skills to negotiate with key customers. Despite BPC attempts to regain their lost positions on the market by dumping, and claims to sell 150,000 tons per month in November and December 2013, Uralkali’s aggressive policy has paid off and Belaruskali, the main donor in the Belarusian economy, will be unable to ‘normalize’ its operations before the year-end.

The estimated production volumes in Q4 point to possible staff-cuts at Belaruskali, which may result in increased social tension in Soligorsk, the city where it is based. Simultaneously, the foreign exchange market could see a substantial reduction in currency sales due to lower foreign exchange proceeds.

Belaruskali may continue to work independently, however, for Belarus’ financial situation, a six-month period to restore client relationships with potash buyers might be an unaffordable luxury. Hopes linked with changes in the shareholder structure have not materialized, and the appearance of Chinese minority shareholders in Uralkali came as an unpleasant surprise. Simultaneously, Uralkali’s performance results imply its unwillingness to reconcile with BPC. Unlike Belaruskali, Uralkali’s capacity is full, exports - despite price reductions - continue, and there is no need for contracts with Belarus. In these circumstances, Uralkali can afford to dictate the terms of any future cooperation, regardless of the harsh statements by the Belarusian leadership.

Thus, Belarus’ desire to win priority terms has resulted in the loss of volumes, conflicts about various commodities and financial difficulties. Belarus has underestimated Russia’s response and will be forced to accept Russia’s terms, and not only those concerning potash cooperation.

Similar articles

Belarusian authorities step up pressure on opposition before street protests
October 02, 2017 12:20
Image: "Новы Час"

During searches of social and "green" activists and anarchists, law enforcement has seized computers, mobile phones and publications. The authorities have also exerted additional pressure on supporters of unauthorized street protests and independent lawyers, who represented defendants in the White Legion case. The security services have stepped up the persecution of opponents before the street protests announced by the opposition. Apparently, the Belarusian authorities aspire that participants in street protests would reduce in number and that the low interest of the population to socio-political agenda before the local election campaign would retain.

Recent trends