The dispute between two Former Soviet Union potash players seems to be quieting. Uralkali's CEO is back in Russia where he will face charges related to the split, and Russia's Uralkali has sold Kerimov's stake to Mikhail Prokohrov. The ducks are in a row for a restart of the joint venture, but Uralkali has been producing potash like its going out of style.
According to Russian investment bank, Renaissance Capital, Uralkali increased output from Q2 to Q3 2013 by 300,000 tonnes to total 2.7 million tonnes for Q3. That was part of Uralkali's plan to run the competition out of business on the basis of their low cost of production. The move leaves significant overhang in the potash market as the declines set off by the breakup have kept North American buyers waiting as long as possible to buy-in.
A mining analyst from Renaissance Capital told reporters that the joint venture would take months to reform and potash prices are not expected to recover until this time next year. That is but one scenario, however. Many believe the Belorussian Potash Company has tendered its last joint venture product. Given Uralkali's sendout capacity and trade infrastructure already in place, including Belarus in the equation would be a little like letting your little brother play right field, just so he can be part of the game.
Potash values have taken a tumble, as we have reported, and North American producers are forced to wait out the declines. As Russia looks to forge ties with Belarus and Kazakhstan for its Customs Union -- the Anti-E.U. -- trade avenues for Belorussian potash will open. This eliminates the need for the Belorussian Potash Co. and a renewed joint venture would likely only complicate an already tangled mess.
Remember Belaruskali's deal earlier this year with Qatar's Muntajat that lends a market to Belarus' potash, but Belaruskali stands a much better chance of recovering the chunk of national revenue removed by the scuffle, working together with Moscow than standing alone.
Meanwhile, retail potash prices lie nearly $125.00/ton below year-ago amid corn futures which have fallen in kind. I maintain current prices would be where they are today with or without the Belorussian Potash Company. Prices will recover, but not until expected new-crop revenue and Dec 14 futures lead the way.
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