You can find articles all over the place telling you that because Uralkali is a low cost producer, even if prices fall big time but they can get a bump in volume, they should be able to make do. I say that is short sighted reasoning because of one thing: A significant portion of Uralkali's production remains in Russia where it is subject to very onerous price controls on which they either break even or lose money. The only money they make is from overseas sales. Which means they need to greater revenues from their exports in order to satisfy their creditors and cover the costs of the current expansion project. I still think it was a good idea for them to break with Belarus and the more we learn about that break up, the more likely the whole thing was orchestrated from the top of the Kremlin with strategic goals in mind.
if they think they can keep up with the world's demand at a significant price cut, let them...i say let the big boys wait it out and see if they can maintain production to meet the demand at a significant price cut. it's like working double or triple for less pay.........can this one player meet production demand at half the price? let them try and i say let the other players let them. see how long it last.
Abba, that is a very good specific point. I would just add that on a more generic level... even the CEO pointed out that this is not the shoe business, volumes in ferts don't double if producers cut the price in half, that's a myth. All these analysts are putting their econ 101 hats on and doing all these bogus back of the envelope calculations and applying that to an industry they just don't understand. Doyle went on to point out that the Russian players just do not have much market share in North America, where Potash Corp does much of its business, they are rather "minor" players. Besides, in the end, we are talking about a bump up in global supply of about 2.5M tons, compared to 55M to 60M tons estimated (demand) and that is IF, if, Uralkali has their mines running at maximum, which is another speculative story. No one player in this industry can dictate the price, no matter how much they lower their prices. They just wind up hurting themselves, which shows this whole thing was political. It couldn't have been for the good of Uralkali stakeholders, because their stock has sold off big time since the speculative announcements from the Russian thug CEO. The market priced the worst case scenario from the news in the pre-market, all at once, for what COULD happen over the next 12 months, but probably will not happen. Billions upon billions of market cap lost in various fert companies globally based on one Russian thugs' say so and speculative musings. What a joke.
Somebody should write a song entitled "Ramping Up Is Hard To Do." As we both know, right now what Uralkali is talking about is increasing their production as they switch over from a price strategy to a volume strategy. But that will take time, money and effort. And in the end, they will probably fail to get where they claiming their functional operational capacity will get to [which would probably take 8-12 months in any event] and the reason is because nobody operates at 100% of their operational capacity. Those with short memories may not recall what it was like some years back when, say, POT was on allocation. And they weren't at 100% of operational capacity at that time either. Once you get to around 95% of your operational capacity, you are about done. People are not machines and even though they work with machines they cannot simply function as machines even with the best of intentions and effort. And now I am talking about the Canadians. The Russians are another story and I just don't buy the notion that they can maintain production at the levels indicated by CEO Baumgarten unless they bring in slave labor. So, OK, there may be some increase in production which will probably get absorbed anyway assuming that CEO Doyle is right that we have just begun a multi-year ramp up in consumption after years of slow growth. And then let us not forget that by the end of 2015, Brazil loses the 600,000/MT they currently produce locally as their mining operation runs out of product with nothing on the horizon to replace it. The supply and demand situation may not turn out what many of the naysayers are predicting.