Potash Corp chief plays down price plunge – by Peter Koven (National Post – August 8, 2013)

The National Post is Canada’s second largest national paper.

As Bill Doyle sees it, last week’s shocking turn of events in the potash industry is nothing to worry about. “I would just urge people to take a deep breath, relax, and everything’s going to be just fine,” the chief executive of Potash Corp. of Saskatchewan Inc. said in a unique question-and-answer webcast on Wednesday.

Mr. Doyle is eager to put shareholders’ minds at ease following the stunning news that Russian producer OAO Uralkali has broken up a cartel-like trading company and plans to max out its potash production to seize market share. It made the move after its partner Belaruskali sold product outside their arrangement.

Investors assumed that the days in which potash producers withheld production to maintain high prices are now coming to an end. But Mr. Doyle disagrees completely.

He said that there have been numerous spats like this one in the past between the Russians and Belarusians, and all of them were eventually resolved. He does not think this one will be any different, saying that it makes no sense for a company like Uralkali to “self-destruct intentionally,” and that there will probably be a settlement between the companies in the short term.

“I don’t see it being a long-term problem at all,” he said.

His view is that a volume-over-price strategy simply does not work in the potash business. He pointed out that Potash Corp. adopted this strategy when it was a crown corporation in the 1970s, and the result was that it nearly went broke. It switched to a price-driven strategy in the 1980s and has been a great success ever since.

Uralkali suggested that its volume-first strategy could push potash prices from around US$400 a tonne to below US$300. Mr. Doyle disputed that as well, saying no one company can determine price. For example, he pointed out that Uralkali is a very minor player in North America, where Potash Corp. does about 40% of its business.

For the rest of this article, click here: http://business.financialpost.com/2013/08/07/potash-corp-chief-plays-down-price-plunge/