The National Post is Canada’s second largest national paper.
Last summer, Russian potash giant OAO Uralkali predicted that its plan to collapse a cartel-like entity would allow it to seize market share from rivals, including those in Canada. It appears the company was right.
On Thursday, the company said its potash sales volumes in the third quarter were 2.6 million tonnes, essentially in line with last year’s figure, while export volumes rose 11%. That is a solid result, because it comes amid a period of extreme volatility and uncertain demand in the potash market. Both Potash Corp. of Saskatchewan Inc. and Agrium Inc. reported year-over-year sales volume declines of more than 20% in Q3, despite falling prices.
Uralkali said its new strategy is progressing “very satisfactorily.” “They did gain share in Q3,” said Joel Jackson, an analyst at BMO Capital Markets.
Historically, potash companies made money by withholding production to keep the market in balance and maintain their pricing power. But Uralkali, the world’s biggest producer, threw that plan out the window when it shut down its cartel-like marketing partnership with Belaruskali last July and vowed to boost production.
The move was extremely controversial — fertilizer stock prices were crushed worldwide, and Uralkali’s chief executive was arrested in Belarus (he is now back in Russia under house arrest).
Competitors argued that Uralkali made a fatal mistake. But the company stood by its decision on Thursday.
It said that while global potash prices have fallen because of its change in strategy, that should encourage more demand in emerging markets because potash is becoming more affordable for farmers.
In theory, that could address one of the biggest problems facing the potash industry: the fact that there has been zero demand growth since 2007, combined with rising production. Potash Corp. announced more than 1,000 layoffs earlier this month because of that weak demand.
For the rest of this article, click here: http://business.financialpost.com/2013/12/19/uralkali-gains-share-amid-volatile-potash-market/