FSU Gives China a Taste of its Own Potash

May 29, 2013 06:37 AM

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Uralkali, the Former Soviet Union's (FSU) potash giant has announced it will slow sales of potash to China, cutting shipments by two thirds. The move is an effort to use China's own hold-out strategy against it to garner a higher price for the mineral. China had delayed purchases of Canadian potash in the fall of 2012 until Canpotex agreed to a $400.00 price tag. That was a deep discount from the originally agreed upon price of $470/ton.

Uralkali and partner Belaruskali were able to keep China supplied via rail, allowing for the holdout. But FSU potash is flexing its muscle as China's potash surplus has swelled to a reported 4 million metric tons.

Meanwhile, Belarus has come under fire again for human rights abuses and faces tougher E.U. sanctions. A press release from yesterday underscores the continuing concern over actions taken by Lukashenko's regime.

"Repression is increasing in Belarus. The last dictatorship in Europe employs capital punishment; opponents are kidnapped or imprisoned. Yet every year the EU buys more from Belarus. We ask for an increase in targeted economic and political sanctions against all enterprises and individuals supporting the dictatorial regime of President Alexander Lukashenko," says Dr. Dmitry Shehigelsky, Belarusians in Exile co-founder.

The initiative to expand sanctions against the regime has been supported by major politicians and experts around the world, as they consider sanctions the only effective means of forcing Lukashenko to restore basic human rights in the country.

Potash and oil exports have kept Lukashenko's warchest filled, and the regime relies heavily on profits from those sectors. With renewed calls for a review of U.S. and E.U. trade policy with Belarus, Lukashenko's plan to hold-out on potash exports to China may have to be put on hold. But sanctions are a long way off and Uralkali will likely continue to short-ship to China until November.

China set the current global benchmark with it's eleventh hour deal with Canpotex last year. Uralkali's challenge of that mark will go unanswered until Chinese K importers feel the pinch. Look for China to explore all other avenues in response to FSU strong-arm tactics. If Uralkali's asking price is too high, Canadian product -- still burdened by surplus -- may have the last laugh and find traction in negotiations with China, potentially leveraging a more reasonable selling price.

 Photo credit: D Michaelsen, Inputs Monitor

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