BPC Breakup: One Gets the Goldmine, One Gets the Shaft

October 9, 2013 11:17 AM
 

Recently released quarterly results from former BPC partners Uralkali and Belaruskali lend insight into how the two have gotten along since the split, and Uralkali seems to have made out like a bandit, while Belarus may have to replace potash as that nation's number one source of revenue.potash1

The idea was simple. Each would try to outproduce the other in an effort to corner market share. But Chinese buyers recently acquired a major stake in Uralkali and as Belarus looks more and more like it will release detained Uralkali CEO Baumgertner, the move's impact may have already slid below effective potency.

Uralkali is currently operating near the top end of production capacity while Belarus' operation rate has fallen dramatically in year-over analysis and quarter-over. Uralkali has also taken the lead on active potash sales tendering a total of 1 million tonnes in September alone. Belarus claims it will sell 300,000 tonnes during November and December, but production has fallen way off in Belarus, and authorities say they do not expect Belarus will be able to 'normalize' their operations before the end of the year.

As Uralkali reports a 4% production increase year-over, Belaruskali is moving in the other direction. Many believe that Uralkali was the 'friendly' wing of BPC and their unique relationships with importers position Uralkali to run Belaruskali -- and Belarus with it -- out of business.

With Belarus considered 'Europe's last dictatorship' by the E.U. and Russia's Vladimir Putin standing firm with Uralkali, Belaruskali is going to have trouble making a go of it alone. Remember, potash is Belorussian President Lukashenko's cash cow. Without export dollars rolling in on potash tenders, the national economy will begin to suffer.

Meanwhile, Putin fixed the Syrian crisis and has taken a place on the world stage noone would have predicted... peacemaker. The chasm between the two nations grows wider each day as Russia's Uralkali increases production and sales, and Belaruskali cannot seem to muster either sales or production increases.

Perspective --

If potash prices were falling because of the BPC breakup, these quarterly results should jake brake this situation to a rumbling halt... and may have already. For the first time since the breakup, we saw potash move higher at U.S. retailers just this week. If you have not yet booked fall potash, we are all in with a 20% kicker as a hedge for spring. The BPC situation, despite lagging Dec. corn suggests moderate upside potential for potash, effective immediately.


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