Potash sector rocked as Uralkali quits cartel
Uralkali will now look to boost sales to retain its dividend policy. It plans to boost potash sales to 13 million tonnes in 2014 and 14 million tonnes in 2015 from 10.5 million tonnes this year by expanding market share in China, India and Brazil.
It plans to export more than 2.5 million tonnes to China this year, mainly by rail - up from 2 million in 2012.
However, it will be harder to win business in India as companies there have already signed import deals for 4 million tonnes, said a senior official at state-run Rashtriya Chemicals and Fertilizers Ltd, declining to be named.
The price fall could cause new potash projects to be delayed or canceled, Raffeisenbank analyst Konstantin Yuminov said.
Miner BHP Billiton has plans for a project in western Canada, which would be the world's largest potash mine if it opens as scheduled in 2017.
BHP is expected to take a decision on the $14 billion Jansen project in its next fiscal year. Rival industry executives have questioned the project's profitability at current price levels.
BHP declined to comment on the impact of Uralkali's move.
Uralkali said it would delay its Polovodovsky mine, which would cost an estimated $2.4 billion to build and increase its capacity by 2.5 million tonnes. Other projects cancelled or delayed include the $6 billion Rio Colorado potash project in Argentina, which Brazilian miner Vale.
The BPC news came days after Uralkali announced that shareholder Alexander Nesis had sold his 5 percent stake. Uralkali said it would freeze its buyback program due to likely volatility in its stock.
One industry source said Canpotex had been marketing prices aggressively earlier this year, while BPC held back.
"Canpotex ... managed to increase its global market share by 24 percent at the expense of mostly BPC," the source said. "The Russians are now waking up and realizing they need to change their game."
Uralkali, with costs of around $60 per tonne, said global prices were likely to be kept above $200 per tonne, supported by European and North American operators that have higher costs.
Potash is the main export product for Belarus, Russia's staunchest ally among the former Soviet republics whose economy is stagnating after a financial crisis in 2011.
Belaruskali was a partner to Uralkali for eight years in BPC, which held 43 percent of the global potash export market. Uralkali was at one point rumored to be interested in buying a stake in Belaruskali - which now looks unlikely.
Their joint venture started to crumble this year as rumors emerged that both were selling potash outside the partnership. The two firms previously denied those rumors.
Uralkali said it pulled out because Belaruskali had made key fertilizer ingredient deliveries outside the partnership.
The decision came as a surprise for Belaruskali, said a top manager who asked not to be identified. According to Uralkali's CEO, the company had informed Belaruskali verbally on Monday and then formally on Tuesday. Belaruskali and BPC did not comment.