Russian city awaits potash boom but outlook fragile – by Agence France-Presse/Global (June 11, 2013)

At first sight, Berezniki looks a typically bland provincial Russian outpost with its decrepit housing blocks and factory chimneys.

But the city in the Perm region of the Urals sits on a vast and hugely valuable secret — one of the world’s biggest deposits of potash, a mineral that is now coveted across the world as a fertiliser for food crops.

Berezniki, 1,200 kilometres (750 miles) east of Moscow, sits on the Verkhnekamsk deposit, which was discovered in 1925 and which was developed after World War II.

Its proven reserves represent some 34.5 percent of the world’s total and the deposit is the second biggest in the world after those in Saskatchewan in Canada, according to the US Geological Survey.

A veritable army of miners march up and down the kilometres of passages that have already been carved out 450 metres (1,500 feet) underground. Their machines work day and night to mine the pink coloured rock where the mineral is contained.

This is then taken to the surface by conveyors to extract the precious mineral. Once turned into powder or crystalised as granules, potash is used as a fertiliser to help crops grow and increase their immunity to disease.

The demand for potash is growing exponentially at a time when the world’s population is exploding and the need for cereal crops among fast-growing emerging economies such as China growing sharply.

But despite the boom, the outlook for the industry has become considerably more complicated in recent years.

The main players in the potash industry need to be constantly aware of the need for a balanced strategy to satisfy demand while not resorting to over-production which could result in a serious price fall.

The Russian potash giant Uralkali which owns five mines in the region and employs 11,800 people had to reduce its production at the end of 2012.

The reason was poor weather conditions for agriculture and also macro-economic uncertainty which made farmers reduce their fertiliser purchases.

There were also delays in the signature of contracts with China and India, two major emerging market clients but also tough negotiators.

The prices of potash jumped after the food supply crisis of 2007-2008, prompting India and China to look for alternative fertilisers. As a result, potash prices slumped by 10 percent in 2012.

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