Uralkali’s board of directors has announced that it has decided to stop Uralkali’s export sales through Belarusian Potash Co. (BPC) and direct all export volumes through Uralkali Trading.

“Unfortunately, we should state that our cooperation with our Belarusian partners within BPC framework has come to a deadlock,” said Vladislav Baumgertner, Uralkali CEO said in a statement. “It has always been Uralkali’s position that export activities of both producers should go through the unified sales network. This fundamental principle of partnership was violated by the Decree No.566 issued by the Belarusian president on Dec. 22, 2012, which cancelled the exclusive right of BPC to export Belarusian potash. Following the issue of the Decree, Belaruskali has made a number of deliveries outside BPC.”

“We have repeatedly informed our Belarusian partners that such actions were unacceptable and they have ultimately destroyed the fundamentals of our prolonged fruitful cooperation. In this situation we have to re-direct our export deliveries through our own trader.
Still, we thank our Belarusian partners for cooperation within the BPC framework and do not exclude the possibility of cooperation on a mutually beneficial basis in future.”

In a conference call, Baumgertner told reporters that the news could mean that international potash prices could drop below $300/mt CFR, from the current contract price of $400/mt CFR to China. Uralkali also indicated it would run at full capacity in 2014, from 2013’s 10.5 million mt/y. With very low production costs versus its competitors, Uralkali believes prices could drop into the $200s/mt CFR.

Together, Uralkali and Belaruskali represented an estimated 43 percent of the global potash market.

Overseas potash company stock prices immediately began to fall on the news, including Uralkali, Germany’s K+S Group and Israel’s Israel Chemicals Ltd.

Quickly after announcing that it was pulling out of Belarusian Potash Co., Uralkali announced that its trader Uralkali Trading has reached an agreement with CNAMPGC, a major Chinese fertilizer importer, on delivery of an optional quantity within the framework of 2013 contract.

“We are sure that this agreement will contribute to potash fertilizer consumption by Chinese agricultural producers,” said Oleg Petrov, Uralkali director for sales and marketing. “In China we can see that potash is significantly under-applied compared to the volumes recommended by scientists. We believe that this agreement will provide certainty for the global potash market and the basis for overall growth of sales volumes in H2 2013.”

Uralkali said it expects to ship 500,000 mt under the contract for the period July 29, 2013 through Dec. 31, 2013.

Uralkali did not indicate a specific price though earlier Uralkali indicated that the existing first-half price of $400/mt CFR to China could drop to $300/mt CFR, if not lower.

Urea prices keep dropping. The Trading Corp. of Pakistan closed its second tender in as many weeks with still lower prices showing up. The lowest price in the latest tender came in at $309.90/mt CFR for 75,000 mt from Blue Deebaj. The price represents a $7/mt drop in just one week.

Earlier this month the Pakistan government authorized TCP to import 300,000 mt of urea for the current application season. The governing body went further and allowed TCP to bypass the usual one-month notification process.

The first tender call brought offers totaling 685,000 mt from 11 companies for an average price of $327.23/mt CFR. This time, 15 companies offered about 1.5 million mt with an average price of $319.75/mt CFR.

Besides the 75,000 mt Blue Deebaj also proffered 50,000 mt at $312.90/mt CFR in optional tons. If TCP were to take the optional tons, it would still be 100,000 mt short of its goal of 300,000 mt.

Within minutes of the earlier tender closing, TCP announced the current tender. Sources say this action will most likely be repeated. If so, the next tender should close on or near Aug. 6.

The drop in price is not unexpected.

The results of the IPL tender late last week showed an ever-weakening market despite bullish talk from producers in the Arab Gulf and China. The fact that offered tons in this latest TCP tender are nearly double from the last one adds to the reports that producers have more tons available for sale than there are buyers.

The IPL tender closed July 26 with prices even lower than those offered in the STC tender just a month ago. And with more companies moving the price down.

Industry sources bemoaned the STC awarded prices of $303-$307/mt CFR last month as unrealistically too low. In the run up to the IPL tender traders were saying any offer below $310/mt CFR could cause financial ruin for any firm offering at those levels.

When the final IPL numbers came out, however, more than 4 million mt were offered below $310/mt CFR, compared to about 800,000 mt in the STC tender. Of the 27 companies offering material, only four had offers at $310/mt CFR and up. In the STC tender, only three companies offered sub-$310/mt CFR.

The lowest offer came from Overseas Trading at $303.50/mt CFR. The rest of the companies were well-known trading houses that don’t often make major mistakes in guessing market levels.

The low prices come on the heels of Arab Gulf producers pushing the price back into the $340s/mt FOB and prices firming in China around $315/mt FOB for granular and $300/mt FOB for prilled.

The offers are to remain valid until August 2.

Under normal rules, IPL will now go to the other offering companies to see if they will match the Overseas’ price. The other companies may respond the same way they did to STC last month. The offering companies could hold firm on their prices and negotiate only the quantities to sell.

One trader noted as the preliminary numbers came out, that few trading houses have enough profit margins to accept any price lower than their initial offer.

Major players have concluded Tampa anhydrous ammonia at the $470/mt CFR mark for August, down some $55-$57/mt from business concluded for July. Phosphate producers who have been seeing lower prices for their own products are aggressively seeking the same for their input costs. If current price ideas for third-quarter sulfur hold, those prices should be down at least $60/lt or 39 percent from the second-quarter’s $155/lt to $95/lt.

Potash Corp. of Saskatchewan Inc. reported net income of $643 million ($.73 per diluted share) on sales of $2.14 billion for the second-quarter ending June 30, 2013, compared to the year-ago $522 million ($0.60 per share) on sales of $2.4 billion.

“Global fertilizer demand was strong during the quarter, but highly competitive markets around the world had an impact on our results,” said PotashCorp President and CEO Bill Doyle. “Despite some weakening of prices in each of our nutrients, the continued engagement of buyers in our key markets was a positive sign.”

Six-month net income was $1.2 billion ($1.37 per share) on sales of $4.24 billion versus the year-ago $1.01 billion ($1.16 per share) on sales of $4.14 billion.

However, PotashCorp has adjusted its forecast for full-year earnings to $2.45-$2.70 per share. This is down from April’s forecast of $2.75-$3.25 per share. The third-quarter forecast is $0.45-$0.60 per share.

The full-year forecast for potash gross margins is $1.8-$2.1 billion, down from April’s forecast of $1.9-$2.4 billion. Estimated potash shipments for the year remained the same at 8.5-9.2 million mt.

The full-year forecast for combined nitrogen and phosphate margins is $1.3-$1.5 billion, down from April’s forecast of $1.4-1.7 billion.

In other news, PotashCorp’s board of directors has approved the commencement of a share repurchase program authorizing up to $2 billion in repurchases of PotashCorp’s outstanding common shares (5 percent of its outstanding common shares) over a one-year period through a normal course issuer bid. The commencement of the share repurchase program is subject to regulatory approval.

At least 12 railcars derailed early this morning at the Port of Tampa, closing the main part of the port, according to local reports. Firefighters were using foam to clean up ethanol that leaked from a few of the railcars. Reports are that it could take most of the day to remove the railcars.