HOUSTON (ICIS)--The decision by Russian potash producer Uralkali to withdraw from its own exports sales group and predict a steep decline in future pricing for the crop nutrient caused a strong reaction on Tuesday from market traders and uncertainty from other fertilizer producers.
Uralkali announced it decided to discontinue exports through the Belarusian Potash Company (BPC), the sales group it jointly owns with ?xml:namespace>
The crux of the disagreement has arisen from Uralkali’s view that partner Belaruskali made deliveries outside of the BPC agreement. BPC was seen as controlling roughly 43% of global exports.
Uralkali’s CEO Vladislav Baumgertner said his company's decision could ultimately send the price of potash down by 25%, possibly below $300/tonne (€225/tonne).
On Tuesday, Uralkali said it had reached an agreement to deliver 500,000 tonnes of potash to
The immediate impact of the decision was felt by fertilizer producers in
Shares of producer Mosaic fell 17.29% to end the day at $43.81, while PotashCorp dropped 16.5% to close at $31.65. It is estimated that the companies who make up Canpotex, the offshore marketing company for
Neither Mosaic nor PotashCorp would comment on the stock price declines or the withdrawal decision by Uralkali.
Canpotex partner Agrium lost 5.4% in value to slide to $86.50. It was not hit as hard since it has more of a focus on nitrogen operations than its fellow North American producers. For its part, Agrium said it was not going to change its strategy based on Uralkali announcement.
“Comments made by the Russian producers have clearly created uncertainty in the potash market. However, this is not the first time that Russian producers have had disagreements. It is important not to overreact to a single statement from one player in the industry, and we plan to continue with normal course of operations,” said Richard Downey, Agrium spokesperson.
“Furthermore, Agrium’s diversity provides for a strong earnings base across the crop input value chain which reduces the risk on any one particular product," he added.
It was not just the big players that were smacked around on the trading floors on Tuesday, as the concern and panic selling was felt by companies such as Intrepid Potash, which shrunk by 28.8%. Compass Minerals International dropped 18.5%, while Chemical & Mining Company of
Some financial analysts late Tuesday were predicting it could cut the GDP numbers by 1.5% for the province. It is estimated that 17% of the province’s exports come from potash.
The provincial government said that any change would be reflected in the fiscal budget updates set to be released in August but that it had previously anticipated the province would draw in $520m in revenues this year from potash endeavours.
“We will be monitoring these developments closely and speaking with
There are expectations that this decision by Uralkali could force Canpotex to follow a course and accept that the marketplace has dramatically changed, resulting in a lower price base and reduction in profit margins for the near term.
($1 = €0.75)