Russia's Uralkali cuts potash forecast, industry flat

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Russian potash miner Uralkali expects to sell 10 million tonnes of the fertilizer ingredient to companies in 2012, below an earlier forecast of 10.2-10.3 million as the weakening global economic environment reduces demand.

"In the very short term ... 2012-2013 we do not expect considerable growth rates, because the general macroeconomic environment does not support that," Uralkali Chief Executive Vladislav Baumgertner told reporters on Thursday.

"In general (Uralkali) production and sales to companies will be around 10 million tonnes," he said, just two months after cutting the target to 10.2-10.3 million from 10.5 million when he also cited softer global demand.

In 2011 the company mined 10.8 million tonnes of potash. In the longer term, demand for the commodity is expected to soar as farmers strive to produce enough food for a growing population amid unpredictable weather conditions.

Uralkali and its rivals had also expected a sharp growth in demand for potash in 2012, which has not materialized.

Baumgertner said the company expected global consumption of potash to be flat year-on-year at no more than 57 million tonnes, while industry sales are likely to amount to less than that at up to 52-53 million tonnes.

Sale volumes also have been low due to high inventories at the start of the year.

Baumgertner said demand in India had been particularly weak, hampered by a weaker rupee and a cut in Indian government support to local farmers.

"These two events made local prices for Indian farmers much higher than they used to pay. That's why we believe that demand in India is damaged. India will not be able to return to the maximum level of consumption of 6-6.5 mln tonnes which we had in 2010," he said.

NEW CONTRACTS

Uralkali, the world's second-biggest potash producer by capacity, hopes to sign a new sales contract with India in August, Baumgertner said, adding that the timing of a new deal with China was more uncertain.

"In general prices for soft commodities support further price increases on the market, although I doubt that any material price increases can be expected this year. The main explanation for that is the general economic environment we observe globally," he said.

Uralkali, controlled by the billionaire Suleiman Kerimov and his associates, is not at present taking steps toward the acquisition of a premium London listing due to volatile market conditions.

Baumgertner has said in the past that it may follow fellow miner Polymetal and steelmaker Evraz to list on the main London market, but he said on Friday the move was not a priority.

"To be honest, we have never had primary listing in London as a top priority ... that was just one of the options in terms of our strategy," he said.

"We will consider this only if it creates additional value for our shareholders. We already behave in terms of corporate governance as though we were (premium) listed in London," he added.

Uralkali in April reported a 64 percent increase in 2011 net profit to $1.53 billion on higher prices and demand.


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