EDITOR: | September 10th, 2014 | 1 Comment

Higher Uralkali sales and global trend suggest higher potash prices for 2015

| September 10, 2014 | 1 Comment
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Passport-Potash-2Russian fertilizer giant Uralkali, a year after shaking the potash market by terminating its strategic pricing alliance (BPC) with the Belarusian potash concern Belaruskali announced that it expects better results for the final quarter of 2014. Global potash sales have reached record levels.  This an important indicator for the potash market in general because Uralkali is the world’s largest producer of potash. Its profits were down year to year, but they beat analysts’ expectations. Significantly, Uralkali has seen a reversal of last year’s trend, as revenue grew 7% to $ 1.7 billion, supported by a 42% surge in sales of potash volumes to 6.1 million tons; profits were lower because of a 30% export price drop. This suggests that the potash market is seeing signs of recovery both in terms of volumes and prices. The lower prices, meanwhile, are helping to spread potash use, widening the market and the basis of future demand. In July 2013, Uralkali adopted a new strategy of pushing production levels higher to bring down prices of potash and conquer new markets, sacrificing margins in the process. That decision led to a stock market collapse of major industry players, who were accustomed to controlling and adjusting production to support prices. Potash prices have since fallen sharply, but Uralkali suggests that its shift of strategy made it possible for demand to resume after hitting a ‘dull’ period in 2013. Uralkali noted that global potash consumption increased, potentially exceeding the record set in 2011 of 57 million tons.

This is good news for farmers. The potash cartel has weighed on agriculture. Potash is an important raw material for fertilizer, and thus determines the cost of crops. Competition in this market is highly regulated. Uralkali worked with Belaruskali within a cartel like organization (BPC) representing 43% of the global market. While in Canada, CANPOTEX (Potash Corp, Mosaic and Agrium) controlled over 20% of potash demand. Together, BPC and CANPOTEX accounted for two thirds of the world potash market, helping to maintain high potash prices, which rose to USD$ 900/ton in 2009 – today they are hovering around USD$ 400. Uralkali preferred to leave the PCB agreed to sell larger quantities and take advantage of its favorable cost structure. Nevertheless, grain prices have declined significantly since the spring, and many producers prefer to wait rather than gamble as to whether or not sales will cover the costs of production.

Traditionally, the farming community works along the assumption that higher grain prices lead to higher fertilizer demand while the more they recede, the more fertilizer prices drop. However, the fertilizer market is more complex than it seems, and if grain prices have undoubtedly some influence on the fertilizer in fact fertilizer supply itself is controlled by many other factors that disrupt that linear relationship. Rebounds in the price of wheat have generally prompted a rebound in fertilizer prices but global factors have been weighing considerably. One of these is Chinese demand. This year, there is good news. Chinese demand is growing and that is having a decisive effect on fertilizer prices globally.

It is expected that China will pay the 2015 contract up to 10% more than last year to secure its supply of potash. Ukraine, a major player in the production of nitrogen fertilizer, will have difficulties producing, given the expected cuts in Russian gas supplies. Increasing tensions between Russia and the West will also raise potash prices. After Canada, Russia is the world’s largest producer of potash. The country also provides 7% and 8% of the supply of fertilizer phosphorus and nitrogen. There is even talk of a return of the BPC cartel between Uralkali and Belaruskali; talks are under way and it remains to be seen what will emerge in the coming months. Brazil has been gradually increasing potash imports used especially to grow soybeans, used for food and fuel. Demand has increased steadily from 2012 to 2014 while areas used to plant soybeans are expected to grow 4%. Already, fertilizer orders for the first half of 2014 gained 7% over 2013, and a corresponding increase is expected in the second half of 2014. Finally, difficulties in transporting fertilizer in some areas due to the overload of rail and waterway networks have also exerted upward pressure on fertilizer prices.


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  • Higher Uralkali sales and global trend suggest higher potash prices for 2015 | InvestorIntel : Pricing News

    […] Higher Uralkali sales and global trend suggest higher potash prices for 2015. […]

    September 15, 2014 - 8:52 AM

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