A second potash antitrust case, alleging price fixing, was filed against major international potash companies. The case, styled Gage’s Fertilizer & Grain Inc. v. Agrium Inc., was filed Sept. 11, 2008, in U.S. District Court for the Northern District of Illinois. As with the other case (GM Sept. 15, p.1), it names as defendants Agrium Inc., Agrium U.S. Inc., Mosaic Co., Mosaic Crop Nutrition LLC, Potash Corp. of Saskatchewan Inc., PCS Sales (USA) Inc., JSC Uralkali, RUE PA Belaruskali, RUE PA Chicago LLC, JSC Silvinit, and JSC International Potash Co.
Gage’s Fertilizer, the plaintiff, is identified as headquartered in Stanberry, Mo. The complaint says Gage’s purchased potash directly from one or more defendants during the class period, which runs from July 1, 2003, through the present. It says Gage’s purchases included, but were not limited to, purchases of potash from Mosaic. The suit was filed by the law firm Segal, McCambridge, Singer and Mahoney Ltd., Chicago; Pearson, Simon, Soter, Warshaw and Penny, San Francisco; and Shughart Thomson and Kilroy PC, Kansas City, Mo. The other lawsuit, Minn-Chem Inc. v. Agrium Inc., which was filed Sept. 11 in Minneapolis, was filed by Lockridge, Grindal and Nauen PLLP, Minneapolis. Like Minn-Chem, Gage’s seeks class action status.
Uralkali said it intends to defend itself vigorously and that it continues to be focused on the management of its business in the best interests of its investors. PotashCorp said that the case has no merit, that it will vigorously defend, and that it will be business as usual at PotashCorp in the meantime. Mosaic also said the case has no merit and that its lawyers are still reviewing it. Other defendants either had no comment or said they were still reviewing the case.
Gage’s case pretty much lays out the same complaint as does Minn-Chem. It notes the power of the two export marketing entities, Canpotex Ltd. for Canada and BPC for the Former Soviet Union. It notes that the latter, which is a joint venture between Uralkali and Belaruskali, supplies 34 percent of the world’s potash exports. It notes that Silvinit, another FSU producer, shares common ownership by Dmitry Rybolovlev, who owns at least 66 percent of Uralkali and about 20 percent of Silvinit. The complaint says Silvinit has been in active negotiations to join BPC, raising the prospect of further consolidation of the industry.
The Gage’s complaint also notes the sinkhole problems faced by Silvinit in the past few years and claims that other producers have used this to withhold their own product and raise prices.
The complaint also cites various FSU executive quotes. One BPC official was quoted as saying “We will be the strongest and most powerful company that will set to a great degree the rules of the game in the world’s potash market, which means billions of dollars.”
The complaint says BPC’s intention to set the “rules of the game” includes cooperation with Canadian producers.
Plaintiff said Uralkali gave a presentation to analysts saying “the two major export associations (Canpotex and BPC) ensure [a] stable pricing environment” for potash.
An outside analyst was cited for saying, “BPC and Canpotex have a dominant role in setting annual prices with large potash customers such as China, India and Brazil.”
In 2007, after obtaining significant price increases for potash sales, Vladimir Nikolaenko, BPC’s director general, was quoted as saying “the company is not only an efficient pursuer of its shareholders’ interests, but is actually a leader to create an acceptable world market price condition for all manufacturers of potash fertilizers.” (emphasis added).
A Goldman Sachs analyst was quoted as recently saying potash producers are simply able to “raise prices at will.”
The complaint claims that between 2007 and early 2008, North American potash prices essentially doubled. By comparison, it cites USDA to show that potash prices far exceeded other prices during that period, with seeds up 30 percent, livestock 27 percent, and fuel 43 percent.
The complaint notes that while 150 countries use potash, only 15 produce notable quantities of it, and that Belarus, Canada, Germany, Israel, Jordan, and Russia have about 90 percent of global potash supply within their borders. It says over half of the world’s global capacity is located in just two regions – Canada and the FSU. It cites industry analysts for saying “the global trade in potash is even more concentrated than OPEC for oil.” Another was said to have referred to the producers as the “Organization of Potash Exporting Countries.”
The complaint also noted the common mantra that there are high barriers to entry to the industry, with a new mine requiring $2.5 billion to build and five-to-seven years to do so.
Likewise, it says Canopotex has entered into cooperative marketing agreements with producers from the FSU.
Gage’s also noted PotashCorp’s reach beyond Canada, to its 26 percent stake in Arab Potash Co. in Jordan, 9 percent in Israel Chemical ltd., 32 percent in Sociedad Quimica y Minera de Chile, and 20 percent interest in Sinofert Holding Ltd., China’s largest potash distributor, as well as its exclusive overseas marketer status for Intrepid Potash, the largest U.S. producer.