Uralkali agrees potash supply deal with Malaysia's FELDA

Reuters

* Uralkali in JV with Malaysian FELDA to boost potash sales

* JV to sell at least 1 mln T in southeast Asia a year

* No clarity on future of FELDA imports from Canpotex

By Polina Devitt and Anuradha Raghu

MOSCOW/KUALA LUMPUR, Dec 9 (Reuters) - Russia's Uralkali, the world's top potash producer, has agreed a supplydeal with Malaysia's state-owned plantation owner, the latestmove in a global battle over pricing and market share betweenmakers of the crop ingredient.

Uralkali said on Monday it had formed a joint venture withthe Federal Land Development Authority of Malaysia (FELDA) whichwould secure potash deliveries to plantations including thoseowned by FELDA in Malaysia and other countries.

The deal could boost Uralkali's sales in Malaysia andIndonesia, a major market for potash due to demand from the palmoil industry. Uralkali's sales in the region were only 200,000tonnes in the first half of 2013 compared with 1.2 milliontonnes in 2012 as a whole.

Uralkali's move comes amid rising competition among potashproducers, fuelled earlier this year by Uralkali itself when itquit a cartel of producers based in Russia and Belarus which hadcontrolled 40 percent of the $20 billion global potash market.

The withdrawal from the cartel hit global prices of the soilnutrient and left a group called Canpotex - owned by Potash Corpof Saskatchewan, Mosaic Co and Agrium Inc - as the world's top export group.

Potash Corp spokesman Bill Johnson said neither the companynor Canpotex had any comment on the deal.

Canpotex has offered potash at reduced prices, biting intorivals' share of the Malaysian and Indonesian markets, sourcesclose to the matter told Reuters earlier this year.

STRATEGICALLY IMPORTANT

Canpotex had in 2010 signed a five-year memorandum ofunderstanding with Indonesian buyers to supply a total of 3.75million tonnes of potash, which made it the country's biggestsupplier. Speaking during a briefing in Kuala Lumpur, FELDAofficials declined to say whether the body would stop buyingfrom Canpotex.

"This (Malaysian) joint venture is another step to furtherimprove our sales net in southeast Asia, which is astrategically important region for Uralkali," Viktor Belyakov,Uralkali's acting chief executive, said in a statement.

The venture involves securing at least 1 million tonnes ofUralkali's potash sales to southeast Asia per year, FELDADirector-General Ahmad Faizoull told reporters.

"They need us and we need them. If we did not grab thisopportunity, we might be paying more for potash," Faizoull said.

Neither Uralkali or FELDA said what price would be paid forthe potash being supplied under the agreement.

Shares of Canpotex partners Potash Corp of Saskatchewan,Mosaic Co and Agrium Inc were down less than 1 percent in earlytrading. Uralkali shares in Moscow were down 0.7 percent at166.55 roubles.

Malaysia and Indonesia supply about 90 percent of theworld's palm oil. FELDA is a major shareholder of Felda GlobalVentures Holdings Bhd (FGV), the world's third-largestpalm plantation operator.

Other Malaysian palm oil planters include Sime Darby, IOI Corp, IJM Plantations andKuala Lumpur Kepong.

Major palm oil firms operating in Indonesia include PT SinarMas Agro Resources and Technology and Singapore-basedWilmar International Ltd.

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