EuroChem Shares Uralkali's Optimism for the Future of Potash

November 8, 2013 09:26 AM

By looking at the headlines over the past few months, one could easily get the idea that Uralkali is the only potash producer of note in the world today. While their exit from the FSU joint venture rocked the potash world and put the fourth leg under tabled greenfield projects, EuroChem, who also resides at the foot of Russia's Ural Mountains is moving forward with two potash plants which will go operational sometime in 2017.

While EuroChem is not as large as Uralkali, low production margins and expected demand from Indo-China are expected buttress the operation. The potash price for sendouts to China slipped this year from $400/MT to today's $325. But EuroChem claims that, even with construction costs, they can still deliver product in the black at $300/ton, telling Bloomberg news their price could fall as far as $250/ton.

EuroChem will begin production ASAP at their two projects, starting-up in 2017, but says it will wait until 2019 before tendering product. By that time, the market could look a lot different than it does today and corn prices in the U.S. may have swung back to the high side. That would inject strength into the U.S. market, and would impact global prices, to a degree.

But the largest buyers -- like India and China -- are often the ones to dictate prices and that may put corn prices at odds with global demand. EuroChem is currently negotiating for $750 million in financing to complete its Usolskiy mine by the first of 2014. But if EuroChem waits until 2019 to tender product, they will have plenty of time to build inventories and garner marketshare.

As Vale SA tables projects, K+S is downgraded and PotashCorp labels Uralkali's stunt, "the dumbest thing they have ever seen", EuroChem bucks the trend and looks ahead with optimism. With wide production margins and a pocket full of cash, EuroChem may be able to stay afloat as they prepare fresh supplies in a down market.

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