OAO Uralkali, the world’s largest potash producer, upended the $20 billion-a-year industry by ending limits on production that underpinned prices and halting cooperation with Belarus that controlled supplies from the former Soviet Union.
The decision sent shares of potash producers plunging as much as 27 percent from Israel to Germany to Canada and the U.S. as investors speculated a flood of supplies will lead to prices will sink for potash, a soil nutrient that strengthens plant roots. Uralkali, part-owned by billionaire Suleiman Kerimov, said it exited the venture after Belarus undermined the sales agreements.
"Uralkali’s announcement completely turns the global potash market upside down," Elena Sakhnova, a VTB Capital analyst in Moscow, said by phone. "If previously global potash producers were acting like an oligopoly, working with the rule that benefited higher potash prices over shipped volumes, now the market will be fully competitive."
Uralkali’s venture and a group comprising Potash Corp. of Saskatchewan, Mosaic Co. and Agrium Inc. played off each other, moderating output and exports along with demand to prevent price swings.
Uralkali shares fell as much as 25 percent, the most since November 2008, and traded down 17 percent at 154.93 rubles by 5:45 p.m. in Moscow. Trading was suspended for a half hour after shares crossed the 20 percent threshhold. K+S AG shares plummeted as much as 27 percent, the most in 15 years, and Israel Chemicals Ltd. fell 18 percent in Tel Aviv. Potash Corp. and Mosaic each dropped 23 percent in New York, while Agrium declined 8 percent.
Uralkali plans to switch exports to its own unit, Uralkali Trading, from Belarusian Potash Co., a joint venture with Belaruskali set up in 2005 to bolster their market position. Cooperation reached "a deadlock" after Belarus’s government canceled BPC’s exclusive right to export the nation’s potash and Belaruskali exported the fertilizer ingredient on its own, the Berezniki, Russia-based producer said in a statement.
Filipp Gritskov, a BPC spokesman, declined to comment, as did Olga Dolgaya, a spokeswoman for the government of Belarus.