(Bloomberg) — The potash industry, which provides the potassium used to grow bigger fruits and vegetables worldwide, is facing a global price war as Belarus seeks to strengthen its share of the $20 billion market. The Eastern European country, which supplied 20 percent of global exports last year, is running mines at almost full capacity to gain a foothold in the U.S. and in China, at a time when the Asian nation is in talks with other providers of the plant nutrient, analysts and competitors say.
The moves come a year-and-a-half after the once-staid market was thrown into chaos when Russia’s PAO Uralkali unexpectedly terminated its relationship with Belarus’s state-owned producer Belaruskali. That venture used to control 40 percent of exports, helping to maintain stable prices.
“The real price war has already started,” said Oleg Petropavlovskiy, an analyst at BCS Financial Group in Moscow. “Belarus is offering lower prices in some regions, while running close to full capacity. It’s the key threat now for the global potash market and will not abate any time soon.”
Potash, used by farmers as an important fertilizer for their plants, is mined deep underground, in areas where water from ancient seas dried up and disappeared, leaving behind potassium salts. Total demand for the nutrient reached a record high of about 62 million tons last year as farmers in Brazil, China and North America increased consumption.
The fertilizer is also vital to the state-dominated economy in Belarus, a former Soviet republic run for two decades by autocrat Aleksandr Lukashenko. Exports there rose 66 percent to 9.5 million tons in 2014, worth about $3 billion.
Belaruskali has total capacities of 12.6 million tons of potash a year, while the miner boosted output in January by 35 percent year on year, it said this week.
Independent Operation
That was the first full year in which Belaruskali operated independently, after the August 2013 divorce from Uralkali. Maximizing potash earnings has become even more important after the Belarusian ruble plunged 29 percent this year and the country aims for a budget surplus.
Belarusian Potash Co., the trading company that handles the country’s exports, was offering the commodity at about $400 a ton last month to U.S. customers. That’s a discount of about $10 from competitors’ prices, according to a Jan. 21 report from London-based industry researcher Fertecon.
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