Uralkali says potash prices to rebound in 2014, ups sales

Reuters
A general view of a Uralkali potash mine near the city of Berezniki
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A general view of a Uralkali potash mine near the city of Berezniki in the Perm region close to Russia's Ural mountains August 26, 2013. REUTERS/Sergei Karpukhin

* Uralkali says crop nutrient price may fall further in 2013

* Ups monthly sales by 43 percent to 1 mln T

* Calls $330/T "guideline" price for rail supplies to China

By Polina Devitt and Alessandra Prentice

MOSCOW, Oct 3 (Reuters) - Russia's Uralkali, theworld's largest potash producer, has increased market sharesince breaking up with its partner in Belarus and expects globalpotash prices to rebound in 2014, the company's head of salessaid.

Uralkali is at the centre of a row between Russia andBelarus, triggered when the Russian company quit a sales cartelwith state-run Belaruskali in July, seeking to maximise salesvolumes and rocking the global potash industry.

Since then, global prices of the crop nutrient havedecreased and may fall further this year or in early 2014 whensupply contracts for top global consumer China are set, Uralkalisales chief Oleg Petrov told Reuters.

China traditionally sets the lowest potash prices, abenchmark for companies negotiating individual contracts withother countries on the fertiliser ingredient.

"All corrections will occur in 2013, reaching a bottom inearly 2014 with the contract in China, after which there will bea definite rebound," Petrov said.

In July, Uralkali said it expected global potash prices tofall to below $300 per tonne in the second half - from $400 atthat time - because of its decision to leave the alliance.

The company has since changed its mind and, citing robustglobal demand, expects prices to stay above $300.

"But there might be a correction from current levels thisyear because Belaruskali and other producers' attempts to placevolumes could put pressure on the prices," Petrov said.

He gave no current average price, but said the domesticprice in China of about $330 per tonne delivered at the borderwas a "guideline" for the company's rail supplies.

The company sold about 2.7 million tonnes of potash in thethird quarter of 2013, including 0.7 million tonnes in July,when it was still in the partnership with Belarus.

CONFLICT SETTLEMENT

Some sources familiar with the situation say the Kremlin iseager to repair the rift with Belarus, for which potash is amajor source of revenue, and that a large stake in Uralkalicould be sold to one of several local bidders.

Several sources, however, have said there are no buyersclose to doing a deal as of now.

Uralkali CEO Vladislav Baumgertner was detained whilevisiting Belarus on Aug. 26 and is now under house arrest, facing trial on charges of abuse of office.

Petrov did not comment on the stake sale rumours or onpotential options for a settlement to the conflict.

"That's not a commercial question," Petrov said. "But ourstrategy is the right one for the moment. We had actually lost alot of the market, and now we're getting it back."

Petrov, who according to colleagues practically used to liveon planes, now cannot travel abroad as Belarus has also accusedhim of professional misconduct and asked Interpol to put him onits wanted list.

"I realise I actually don't need to travel as much as I didbefore," he said when asked whether the situation had a negativeimpact on the company's business.

"It doesn't affect my work. We have concluded our contractswith China and India and the spot markets can be dealt withperfectly well without travel by our colleagues in the regionalnetwork. (But) it will be necessary to travel again moreactively in 2014."

MONTHLY SALES RISE

Working alone, Uralkali increased monthly sales to 1 milliontonnes in August and September respectively, mainly thanks tothe Brazilian and Asian markets. Monthly exports currently standat around 850,000 tonnes. The company plans to sell similarvolumes per month until the end of 2013.

Since the split with Belaruskali, Uralkali's supplies toChina have increased modestly to around 250,000 tonnes by railand sea per month, including about 160,000 tonnes by railthrough spot contracts, he said.

Uralkali did not disclose figures on pre-split sales toChina.

The company is also supplying between 100,000 tonnes and150,000 tonnes per month to India, where the price has beenadjusted to $375 per tonne from $427 since the break-up of thejoint venture.

In Brazil, the price for Uralkali's supplies has fallen to$350-360 per tonne, down $30-40, Petrov said. The companycurrently supplies 150,000-200,000 tonnes to Brazil per month.

Until the joint venture broke up on July 30, Uralkali used aformula for calculating Russian domestic prices based on itsexports. This formula led some analysts to think it haddecreased prices for China since July, which the company denies.

"After the split, Belarus offered its own product to somebig NPK (nitrogen, phosphorus and potassium) producers in Russiaat the price of 4,600 roubles ($140) per tonne. Uralkali had nochoice but to protect its market," Petrov said.

"In the end, Uralkali lowered its price to 5,100 roubles($160), but this was a one-off and that figure has no connectionwith the company's export price to China," he added.

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