MOSCOW, July 30 (Reuters) – Russia’s Uralkali has dismantled the world’s largest potash cartel in a move that it expects to slash prices by 25 percent, heralding a reshaped industry and pummelling shares of companies that produce the key fertiliser ingredient.
The break-up of the Belarus Potash Company (BPC), a joint venture with Belarussian partner Belaruskali, could cause a price war and leaves North America’s Canpotex as the dominant potash export venture.
It could also lead to cancellations of projects by rivals as the industry weighs the effect of lower prices, but may feed through to better deals for farmers and ultimately consumers. U.S.-listed shares of the Canpotex owners – Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc – plummetted, cutting their market value by nearly $15 billion.
BPC and Canpotex had accounted for 70 percent of global trade in potash, and the duopoly had set identical prices in key markets such as China and India.
“In the last few years, BPC and Canpotex … succeeded by raising potash prices much above their production cost,” a senior official at a major Indian potash firm said, asking not to be identified because of the sensitivity of the matter.
“It hurt Indian companies, Indian farmers and the Indian government,” the official said. “The break-up will limit their power … Certainly this will bring down potash prices.”
Uralkali is pulling out of the venture after reaching a “deadlock” over sales and will export potash via its Swiss-based Uralkali Trading, Chief Executive Vladislav Baumgertner said.
“In the near future we expect (global) competition to become stronger – that will push prices down,” Baumgertner said.
The decision to quit BPC may lead to a fall in the global potash price to below $300 per tonne in the second half of 2013, from the current $400, Uralkali said. Lower fertilizer prices could mean rising demand from price-sensitive farmers in Asia.
“It is as if Saudi Arabia decided to leave OPEC – oil prices would fall immediately,” said Dmitry Ryzhkov, equity sales trader at Renaissance Capital.
Shares of Uralkali, part-owned by tycoon Suleiman Kerimov, plunged more than 20 percent, prompting the Moscow bourse to suspend trading in the stock.
Shares of Germany’s K+S, a rival fertilizer firm, sank 24.5 percent to a six-year low.
Potash Corp shares fell as much as 24 percent to a three-year low of $29.00. More than 8 million shares changed hands by noon, making it their heaviest day of trading in nearly three years.
Mosaic shares plunged as much as 25 percent to $39.95, also a three-year low, on trade of 4 million shares — their heaviest day in two years.
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