Prokhorov to Purchase Kerimov Stake in Uralkali

November 18, 2013 09:00 AM

A Russian billionaire better known in the United States as the man who bought the New Jersey Nets basketball team and moved it to Brooklyn has made a purchase in Russia that holds high hopes for the future of FSU potash. Mikhail Prokhorov, along with Uralchem owner Dmitry Mazepin, is in talks to purchase a 21.75 percent stake in Uralkali from potash pariah Suleman Kerimov.

Many believe it was Kerimov who was targeted by Belorussian authorities when Uralkali CEO Baumgertner was accosted in Minsk. Baumgertner remains in custody under house arrest, but Kerimov's exit may signal the turning of a page in the sordid tale of FSU potash.

The Belorussian Potash Company controlled roughly 40 percent of global potash supplies and when the joint venture split last summer, Kerimov was the focus of Belorussian ire. Although Kerimov's name was one of a handful sought by Belarus, his was foremost as Uralkali's largest stakeholder. Belorussian authorities have said all along that the joint venture could only be revived with Kerimov out of the picture.

With Prokhorov purchasing Kerimov's shares via investment vehicle Onexim, the inevitable next question is, when will BPC put itself back together? Earlier this year, China stepped up when the price was right and acquired a 12.5 percent stake in Uralkali while Belarus made deals with Muntajat in Qatar. Uralkali has won the sendout war so far, and Belarus' prospects are limited as a stand alone purveyor.

Meanwhile, the news has executives at Belaruskali giddy with joy and rumors of more price declines have been forwarded. Belarus now believes it will be able to tender potash exports for $300.00/tonne in 2014 -- a number Uralkali shied away from, setting its own global sendout price closer to $340/tonne.

As Belaruskali threatens to lowball the market at $300.00/tonne, it seems like a layup prediction to anyone in touch with corn futures. I wondered at the convenience of Uralkali calling for lower potash prices just as corn began to slump. This big crop is wagging a long tail, and crop prices are not yet expected to recover, with many believing the bottom in corn prices has not been set.

Uralkali's new stakeholder is no stranger to fertilizer or to Russian politics. Prokhorov's purchase may have gotten Kerimov out of hot water, but Baumgertner is still under Minsk house arrest, and the Belorussian Potash Company still lies in state. With new players at the table, the Belorussian Potash Company may still have a place in the sun, and Uralkali might yet come home to roost.



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