Potash Corp. of Saskatchewan Inc. President and CEO William Doyle on Aug. 7 downplayed OAO Uralkali’s recent exit from trading via the Belarusian Potash Co. (GM Aug. 4, p. 1). Doyle, speaking in a virtual meeting on the PotashCorp website, said spats between Russian and Belarusian entities in the past were not uncommon. In those instances, they were less public and they patched up their differences.
Asked about whether this was a temporary break-up, Doyle said he thought it would be “shorter rather than longer,” and that logic would prevail. However, Uralkali CEO Vladislav Baumgertner was also giving interviews last week, with one posted on the company’s website, and he took a contra position to Doyle. “People will need some time to adapt to the fact that it is not a temporary fall out between Uralkali and Belaruskali.” Baumgertner said the market needs to re-evaluate and calm down, and volatility should go down as well.
Baumgertner said Uralkali’s choice was to stand back and watch the collapse of BPC or to take preventative action. Uralkali said Belaruskali, Uralkali’s partner in BPC, was selling product outside BPC.
Baumgertner also pointed to Canpotex Ltd.’s conclusion of a first-half 2013 contract with the Chinese in late December 2012. BPC in the past has often taken the lead in price negotiations; however, in this case, it was Canpotex that concluded business first. Baumgertner said the Canpotex action was unexpected. “I cannot say for sure, but I can assume that this irrational step was caused by concerns that BPC was on the brink of collapse and Canpotex had therefore decided to act first.” As a result, he said BPC lost a significant part of its market share, mainly to Canpotex. He said the Belarus position was to catch up on market share by using independent traders. “Thus, the market was weakened from several angles, and we have essentially found ourselves between a rock and a hard place.”
As for Uralkali’s assertion that prices may drop 25 percent, Doyle said no one producer can determine price, noting that supply and demand determines that. Baumgertner reiterated that the volumes over price strategy could soon lead to prices around $250/mt.
Doyle said that North America was PotashCorp’s largest market, and that Uralkali was not going to determine the price there. He said it might have influence in some places, but not others. He noted that PotashCorp has extensive infrastructure throughout North America, while Uralkali has no infrastructure and is only a minor player selling barges at the U.S. Gulf.
Baumgertner said it is Uralkali’s new strategy to sell maximum volumes in every market.
Doyle and Baumgertner gave different analogies on lower prices. Doyle said potash is not like shoes, where if the price is cut the buyer takes two pairs. Doyle said the farmer will not buy twice as much, or more than he needs. Baumgertner said there has been an enormous price discrepancy in the potash market. While crop prices have been high, he said potash has seen no growth in consumption. “Probably one of the main reasons for this was the relatively high price of potash compared to nitrogen and phosphate fertilizers in a complicated macroeconomic situation.” He, like Doyle, both believe that global consumption can soon get to 60 million mt, with annual growth rates at 3 percent or above. Baumgertner, however, believes lower prices are what will move the industry to that level.
Going forward, Baumgertner said greenfields have to be eliminated, low-cost producers will deteriorate and shrink, and then probably there will be consolidation. Simultaneously, he said demand would be stimulated by lower prices and active promotion of balanced fertilization.
Doyle reiterated that there would be no change at Canpotex Ltd., the Saskatchewa