Fertilizer Markets and Finance

Caution from one of the world’s largest potash producers is likely to temper 2013 potash demand figures, but will not significantly change projected g

Russian potash behemoth Uralkali (MCX:URKA) is cautioning investors that the potash demand rebound anticipated for 2013 may not be as big as initially expected.

After its 2012 financial results, released on April 10, showed that its 2012 revenues fell by 6 percent, to $3.95 billion, Uralkali told investors that weak Indian potash demand and unfavorable weather conditions in select regions will temper overall demand this year.

Uralkali projects that global potash demand in 2013 will hit 53 to 54 million metric tons (MT), slightly higher than 2012’s 51 million MT, but lower than earlier projections from analysts and other potash producers.

Read more at Potash Investing

Russian fertilizer company Uralkali (URKA.RS) said Friday its potash production rose 8% in the first quarter compared with the year earlier to 2.08 million metric tons.

In the same period last year, the company produced 1.92 million tons.

In December, Uralkali said it would cut its production capacity to 50% in the first quarter because of falling demand, largely driven by a delay in signing supply contracts with China and India.

But in January, the company reached a 1-million-ton deal with China at $400 per ton, and in February it reached a 1-million-ton deal with India for $427 a ton.

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Uralkali (LSE: URKA), one of the world’s largest potash producers, today announced that the Russian Federal Agency for Subsoil Use (Rosnedra) has extended the term of exploration and mining for the licences at Uralkali’s working mines.

Uralkali holds licences for seven blocks of the Verkhnekamskoye field. The licences for the Ust-Yayvinsky and Polovodovsky blocks are valid until 2024 and 2028, respectively. Five other licences, which were to expire on 1 April 2013, have been extended:

• licence for the northern part of Solikamsky block (Solikamsk-1) - until 1 January 2018
• licence for the southern part of Solikamsky block (Solikamsk-2) - until 1 January 2021
• licence for the Novo-Solikamsky block (Solikamsk-3) - until 1 January 2018
• licence for the Durymansky block (Berezniki-2) - until 1 January 2021
• licence for the Bygelsko-Troitsky block (Berezniki-4) - until 1 January 2018

The reserves at Uralkali’s mines will be depleted much later than the licences expire. The Company, therefore, intends in future also to extend its licences timely and in line with the legislation.

MINSK – Belarussian Potash (BPC), a joint venture between potash producers Uralkali and Belaruskali, expects the fertiliser market to recover this year, allowing it to lift some premium prices that have fallen in the last few months.

BPC, whose prices help set a benchmark for the crop nutrient’s market, raised its spot price for Brazilian buyers by $15/t to $465/t last month after cutting the price in January for Chinese importers to $400/t from $470/t and signing a deal with Indian buyers at $427/t in early February.

“The potash fertiliser market is indeed recovering. The market conditions allowed us to revise prices for Brazilian importers,” BPC CE Valery Ivanov said in an emailed reply to questions from Reuters.

“We do not rule out that we will have a chance to review our prices in other regions as well.”

Potash contracts with big importers like China and India typically set a floor for global prices, with spot buyers like Brazil paying a premium.

BPC’s Indian and Chinese deals covered supplies of one-million tons each and Ivanov said he expected to sign additional sales contracts with other companies from those countries.

Read more at Mining Weekly

The contract reached between Sinofert Holdings (HKEX:0297) and Canpotex, the potash export arm of Potash Corporation of Saskatchewan (TSX:POT,NYSE:POT), Mosaic (NYSE:MOS) and Agrium (TSX:AGU,NYSE:AGU), will see 1 million tonnes of potash exchange hands in the first half of 2013.

The price of the contract, which The Globe and Mail reported is about $400/tonne, represents a decline of $70/tonne from the previous contract signed between Canpotex and China. The agreement is expected to set the tone for other deals signed through contracts and spot-price purchases.

Depressed 2012 fertilizer demand from India and China is a key component of the price decline.

Southeast Asia saw the biggest decline in potash demand in 2012, with a 1.9-million-tonne, or 20.2-percent, fall off compared to 2011, according to data collected by the Financial Times.

India saw the biggest proportional decline, with a reduction of 34.8 percent, or 1.6 million tonnes, in 2012. The drop came on the back of a devaluation of the country’s currency and the return of government subsidies for fertilizers.

India is the next big customer in line to ink a deal with Canpotex, but when that contract will be settled is currently anyone’s guess. The country is completely dependent on foreign supplies of potash, but does make use of alternative products, principally urea; it last signed a contract in August 2011, according to The Globe and Mail.

Read more at Potash investing News

Belarussian Potash Co., the trading arm for Belaruskali and Russian potash producer Uralkali (URKA.RS) agreed Monday with top Chinese importers Sinochem International Corp. (600500.SH) and CNAMPGC to a contact for 1 million metric tons of potassium chloride for $400 a ton for the first half of 2013.

The contract calls for a firm commitment of 700,000 metric tons with a option for an additional 300,000 metric tons, BPC said.

“New contracts with our Chinese partners are a positive signal for the global potash market setting the floor price and anticipating significant delivery volumes. We are confident that these contracts will act as a stimulus demand in other regions and provide the basis for overall growth of the potash market in 2013,” said Oleg Petrov, Uralkali’s director for sales and marketing.

Last week, Uralkali said it had set the price for Russian fertilizer producers for the first quarter at 10,252 rubles ($332) per ton. In December, Uralkali said it would cut its production capacity to 50% in the first quarter due to lessening demand. Analysts said the fall-off in Uralkali sales was largely driven by the delay in signing a contract with China and with India. A deal with India remains unresolved.

Read more at Fox Business

MINSK, 29 December (BelTA) - Belaruskali and Uralkali agreed on the volume of sale and price for potash fertilizers in 2013-2015. The agreement was reached during the talks with shareholder of OAO Uralkali Suleiman Kerimov in the Belarusian Government, Prime Minister of Belarus Mikhail Myasnikovich said in an interview with the TV channel Belarus-1 on 28 December, BelTA has learnt.

“We agreed on the solutions to all the contentious issues that we discussed for almost a year,” said the Belarusian Prime Minister. According to him, the parties agreed on the policy of sale of potash fertilizers in 2013-2015. “We agreed on the proportions of sales: in 2013 Belarusian fertilizers will take the share of 48.3%, in 2014 - 49% and in 2015 it will be 50% to 50%,” said Mikhail Myasnikovich.

The sides practically agreed on the pricing formula, which was one of the most difficult issues, said the Prime Minister. The Belarusian side insisted on taking into account the quality of potash fertilizer, and reached an understanding on this issue with the Russian side. According to Mikhail Myasnikovich, apart from powder-like fertilizer Belarus also produces a lot of types of granular fertilizers that are more expensive as they require large production capacities and technology. “Of course, profitability and profit of Belaruskali should be higher,” said the Prime Minister.

Mikhail Myasnikovich also commented on the rumors of a possible termination of the Belarusian Potash Company. “There was a lot of talk in the media whether the Belarusian Potash Company would continue operating or not. I would like to reassure the public: BPC will aggressively step up sales in 2013, and will decrease the sale of potash fertilizers through Uralkali Trading, a company owned by Uralkali,” he said.

Belaruskali will not trade in potash fertilizers. As before, it will be mainly engaged in the production of potash fertilizers. This issue was also a matter of discussions with the Russian side,” the head of government said. According to him, the average selling price of potash fertilizer stood at $410 per tonne last year. In January-October the price rose to $433 per tonne. “Thus, by optimizing markets, effectively working with the volumes and price, I think that in 2013, we will restore the volume of sale and earnings at the level of 2011,” said Mikhail Myasnikovich.

By MATEUSZ PERKOWSKI

Capital Press

Two foreign fertilizer companies have agreed to turn over information about an alleged price-fixing cartel and pay nearly $13 million to settle an antitrust lawsuit over potash.

A federal judge recently granted preliminary approval for two deals that would end litigation between fertilizer buyers and the Russian potash companies, Uralkali and Silvinit, and their affiliates.

However, the fertilizer buyers will continue to pursue a class action lawsuit against other major global potash producers who didn’t sign on to the settlement, including Agrium, Potash Corp. of Saskatchewan and the Mosaic Co.

Uralkali and Silvinit agreed to two settlement deals — the companies will pay $10 million to farm suppliers who bought potash directly from them and $2.75 million to farmers and others who bought the product through middlemen.

An important component of the latter deal with indirect buyers is an “agreement to cooperate,” which means that Uralkali and Silvinit will “provide evidence regarding the liability of each remaining defendant in the litigation” and turn over “transactional documents” and other information, according to a court document.

The plaintiffs asked the judge to approve the deals because such “early settlements can serve as ‘icebreaker’ agreements, strengthening plaintiffs’ hand in the litigation and encouraging future settlements,” the document said.

Several fertilizer buyers have been pursuing the case against major global potash producers since 2008, claiming they restricted supplies to manipulate prices within the U.S.

About 85 percent of the potash used by U.S. farmers is brought in from overseas, mostly from Canada, Russia and Belarus. The fertilizer is a primary crop nutrient, alongside nitrogen and phosphate.

The lawsuit accused global potash producers of coordinating their mine and factory shutdowns to reduce supplies in China, India and Brazil, thereby inflating worldwide prices for the fertilizer to the detriment of U.S. buyers.

The 7th U.S. Circuit Court of Appeals initially threw out the fertilizer buyers’ lawsuit in 2011 but then reversed its ruling in 2012, allowing the litigation to continue.

“Foreigners who want to earn money from the sale of goods or services in American markets should expect to have to comply with U.S. law,” according to the 7th Circuit’s ultimate decision.

The remaining defendants in the lawsuit recently asked a federal judge to dismiss the indirect buyers from the litigation because they lack legal standing to pursue the case under antitrust laws.

“Any possible injury to plaintiffs occurred in a market secondary to the alleged price-fixed market and occurred only after potash was transformed into a different product,” the defendants said in a court document.

NEW DELHI: Global potash major Uralkali on Thursday said it expects India to sign new contracts for the import of key fertiliser potash in January-March next year. India, one of the world’s biggest importers of muriate of potash (MoP), imports about 4-5 million tonnes of the soil nutrient every year. 

“The new contract is expected to be concluded in the beginning of Q1 2013. We also believe in strong mid and long term prospects of the Indian potash market,” Russia-based Uralkali said in a statement. 

Contracts of potash signed in 2011 continued to arrive at the ports in high volumes during July-September 2012. However, poor monsoon rains created increasing cautiousness among the farmers about purchasing fertilisers, it added. 

Fertiliser Association of India (FAI) estimates NPK fertiliser sales declined by 25 per cent in April-August 2012 compared to the year-ago period, reflecting demand destruction due to higher prices following a cut in the state subsidy for potash and phosphate and a slow start to monsoon, it said. “We expect the market to come back to the previous peak level of 6.5 million tonnes after 2014,” Uralkali added. 

Uralkali, world’s second largest potash producer, also announced its results for the third quarter of 2012. The company posted a net revenue of USD 2.79 billion in the January-September period of this year compared to USD 2.69 billion in the same period of previous year. It produced 7.4 million tonnes of potash in the first seven months of 2012 compared to 8.1 million tonnes in the same period of 2011. 

The global potash supplier’s assets include 5 mines and 7 treatment mills in Berezniki and Solikamsk in Russia.

Dec 20 (Reuters) - Russia’s Uralkali said high stocks, poor weather and economic volatility around the world will cause a 13 percent fall in global deliveries of potash this year, but forecasts a rebound in demand in 2013.

The company, controlled by businessman Suleiman Kerimov, said third quarter revenue fell 12 percent to $1.06 billion. For nine months, revenue rose 4 percent to $3.29 billion.

It expects global potash deliveries this year will total 48-49 million tonnes, around 13 percent down from the last year, due to record deliveries in 2011 which created significant stocks, continued macroeconomic volatility and unfavourable weather conditions in many regions of the world.

“We hope that positive crop dynamics that we are observing now will provide for a significant rebound in the potash demand next year,” said CEO Vladislav Baumgertner.

Major potash producers — and the banks that finance them — are sharing their 2013 potash plans, and as China and India account for a combined 30 percent of total global potash shipments, it is not surprising that these two countries dominate the forecasts.

While projections are mixed, all sides appear to acknowledge that there is significant potential for a return to demand in 2013. The question is how and when it will arrive.

Potash producers optimistic

In mid-November, Potash Corporation of Saskatchewan (TSX:POT) announced one of the most optimistic forecasts for overall growth in 2013. At a Morgan Stanley investor conference, PotashCorp CEO Bill Doyle said that global shipments are expected to hit between 57 and 58 million tonnes (Mt) in 2013.

“[W]e see that as a big improvement over this year. And we think 2014 is also going to be a strong volume year,” Doyle said.

Doyle noted that a return in demand from China and India — as well as rapid demand expansion in Latin America — is key to that growth.

Russia’s Uralkali, while confident that Chinese and Indian demand will return, is less certain about an early 2013 spike in demand. Uralkali announced this week that it will cut its potash output by half, to 2 Mt, in the December to March period. CEO Vladislav Baumgertner told Reuters that the move is aimed at reducing excess global supply during a protracted fall in demand.

Read more at Potash Investing News

* Potash producer to cut output by 2 million tonnes Dec-Mar

* Uralkali says India, China halted contract purchases in H2

* Low demand to persist in the Q1, prices seen stable

* Global demand to rise next year to 54 million tonnes

By Natalia Shurmina and Polina Devitt

MOSCOW, Dec 4 (Reuters) - Russia’s Uralkali will cut potash output by half to 2 million tonnes in the December to March period to reduce excess global supply during a protracted fall in demand, its chief executive said in an interview.

China and India halted contract purchases of the crop nutrient in the second half of the year and are expected to contract lower volumes next year, making for a slow start to 2013.

China is seen as being well supplied, while a reduction in Indian subsidies and a weaker rupee have made potash more expensive the nation’s farmers.

“Starting from December and during the first quarter we will work with 50 percent of capacity, because demand will be rather weak,” CEO Vladislav Baumgertner told Reuters. “We also expect that this will help decrease stocks.”

Uralkali, the world’s largest potash miner by output and the second-biggest potash producer by capacity behind Canada’s Potash Corp of Saskatchewan Inc, expects to sell about 1.6 million tonnes of potash in the first quarter of 2013.

Full-year 2012 sales are seen at 9.3 million tonnes, said Baumgertner. He did not provide production guidance, saying only the company’s annual capacity will be at 13 million tonnes by the end of this year.

Read more at Reuters

Members of the Swiss parliament try to figure out if it is possible to prevent the appearance of Lukashenka’s company in the country.

The media report about plans of the Belarusian authorities to register Soyuzkali firm in the Canton of Zug. It will be a joint Belarusian-Russian venture with Belaruskali and Uralkali companies owning 50% of shares each.

Under the laws of the Canton of Zug, the details will be kept in secret until the end of the official registration process, Radio Svaboda reports.

According to  Нandelszeitung, due to the joint ownership and Swiss registration address,  Alyaksandr Lukashenka will be able to avoid sanctions and make profit without obstacles by selling Belarus’s main resource – potash fertilizers. Besides, the new company, which will be controlled by Minsk, will have more possibilities to receive loans due to its residence in Switzerland. The Swiss registration address will also give a more favourable tax regime.

The Swiss government declines to give comments to journalists. Meanwhile, members of the Swiss People’s Party and the Green Party insist that members of the Zug government should find out if it is possible to prevent the appearance of Lukashenka’s firm in Switzerland. If there are no such possibilities, legislation should be changed, they think.

On Friday Uralkali (URKA) reported 3Q12 operational results. In 3Q the company produced 2.6 mn tons of potash (versus 2.9 mn tons in 2Q and 2.8 mn tons in 3Q11). We rate the results as neutral for the name, and expect that URKA’s success (or failure) to conclude the contracts with the key importers in 4Q should become an important signal for the market.

On Friday, October, 8th, Uralkali (URKA) reported 3Q12 operational results. In 3Q the company produced 2.6 mn tons of potash (versus 2.9 mn tons in 2Q and 2.8 mn tons in 3Q11). Thus, during 9M12, Uralkali has produced 7.4 mn tons of potash versus 8.1 mn tons for 9M11. Rather strong results for 3Q were expected by the market. During the year Uralkali has downgraded its 2012 production target several times, and it is now 10 mn tons. At the same time, the company’s ability to maintain high capacity load will to a large extent depend on the ability to conclude long-term contracts with China and India, which is expected in the end of October. 

  1Q12 2Q12 3Q12 3Q11 QoQ YoY

KCl, mn t 1.9 2.9 2.6 2.8 -10.3% -7.1%

Source: company

Reuters reports Russian potash giant Uralkali (LSE:URKA) has settled US antitrust claims after agreeing to pay direct and indirect plaintiffs $10 million and $2.75 million respectively.

The class-action – thrown out in September last year only to be revived by the US Court of Appeals in June – dates back to 2008 and accuses seven companies of engaging in a global conspiracy to raise the price of potash since 2003.

Uralkali’s move will put some pressure on the other defendants which include Agrium (NYSE:AGU), Potash Corp. of Saskatchewan (TSX:POT), Mosaic Co. (NYSE:MOS), Silvinit (now merged with Uralkali), Belarusian Potash and International Potash.

Together the groups alleged to operate as a ‘cartel’ produce some 70% of the world’s potash – a key ingredient in fertilizers. Global demand is between 50–60 million tonnes per year.

Chinese and Indian consumption drove the potash price from $100/tonne in 2004 to almost $900/tonne in the run up to the 2008 recession when the boom went bust and prices rapidly fell back to $350/tonne.

After trading in the $500–$540 a tonne range for most of last year, the price of soil nutrient has steadily declined this year to its current levels of $460–$470 a tonne.

While miners like BHP Billiton and Vale put potash projects on ice and producers such as Potashcorp idle mines, Uralkali has been expanding production and reaping windfall profits thanks to the fattest margins in the industry.

Earnings at the $24 billion company is set to jump 30% to $2.69 billion this year. Uralkali stock – partially listed in London – is up 19% so far this year.

Uralkali has spent 900 million on a share buyback program and is set to pay out an additional $1.5 billion cash to shareholders this year.