Bloomberg News

Uralkali Cutting Potash Output 40% on India, China Delays

March 13, 2012

OAO Uralkali Sales Director Oleg Petrov. Photographer: Alexander Zemlianichenko Jr./Bloomberg

OAO Uralkali Sales Director Oleg Petrov. Photographer: Alexander Zemlianichenko Jr./Bloomberg

OAO Uralkali (URKA), the world’s biggest potash producer by output, is cutting first-quarter production by about 40 percent from a year earlier after China and India postponed purchases and may further reduce a 2012 target.

India resumed potash purchases this month while asking to extend the first-quarter schedule until August, Oleg Petrov, Uralkali (URKA)’s director of sales and marketing, told reporters today in Moscow. This means a delay in sales of 600,000 metric tons to 700,000 tons that Uralkali’s Belarusian Potash Co. trader had planned for the first three months.

Uralkali’s stock dropped 3.6 percent to 225.74 rubles a share at the 6:45 p.m. close in Moscow, the lowest in a month and the biggest drop today on the 30-stock Micex Index.

The Russian company expects to sign a supply accord with China in April or May, according to Petrov, later than the estimate he gave in December. “We’ve started negotiations and indicated that we are seeking a certain price increase,” he said, declining to elaborate.

BPC, as the trader is known, decreased spot prices for certain customers in Brazil to $520 a ton from $550, following a move by Israel Chemicals Ltd. (ICL) and Mosaic Co. (MOS) this quarter, Petrov said.

‘Wonderful’ Prices

Uralkali doesn’t rule out a further cut in its 2012 production target, Petrov said. The forecast for this year was lowered to 10.5 million from as much as 11.8 million tons to buoy prices, Chief Executive Officer Vladislav Baumgertner said in December.

The 40 percent decline in the first quarter is pro-forma, according to Uralkali, which completed its acquisition of OAO Silvinit in June. Output is at 60 percent of capacity now, the press service said.

Uralkali retains a positive outlook for sales this year after prices for soft commodities “recovered” from last year, which may boost farmers’ profits and ability to purchase fertilizers, Petrov said. The prices for some crops, such as corn and soybeans, are “just wonderful,” he said.

Corn rose about 15 percent to $6.7150 a bushel in the three months to March 12. Soybeans closed at $13.3050 a bushel in Chicago yesterday, an almost 20 percent rise in three months.

Brazil showed strong demand in March after cutting inventories this year and will increase purchases even more when the season starts in May, Petrov said. Malaysia, Indonesia and Vietnam are also buying, he said.

Uralkali, whose trader BPC accounts for as much as 40 percent of world potash exports, expects sales of Russian and Belarusian potash in China to stay at last year’s level of more than 3 million tons. Sales in Brazil and Asia, about 2.8 million tons in each region last year, may fall because of local stockpiles, Petrov said. BPC will maintain its share of shipments to India, even with an expected decline to about 2.5 million tons from 3 million tons, according to Petrov.

World potash consumption will probably stay little changed this year at about 58 million tons, while physical supplies will fall to about 56 million tons because of stockpiles from last year, he said.

To contact the reporter on this story: Marina Sysoyeva in Moscow msysoyeva@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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