All Posts from July 30, 2013

Uralkali move shakes up potash market

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.

Uralkali concludes Chinese K contract

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.

TCP tender shows even softer urea prices

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.