TORONTO – Shares of major North American potash producers have plunged following news that a Russian rival is making moves that could push down global prices for the fertilizer they produce.
Uralkali, one of the world’s largest potash producers, said Tuesday it has decided to stop its export sales through the Belarusian Potash Company and direct all export volumes through its own Uralkali Trading.
Traders interpreted the breakup of the European potash cartel as a sign that Uralkali will be able to drive down the price of potash, affecting other rival producers in Canada and the United States.
Shares in the rival Canpotex potash marketing group were down sharply, as PotashCorp of Saskatchewan (TSX:POT) the most active TSX stock, plunged $8.95 or 23 per cent to $29.95, shares in Agrium (TSX:AGU) dropped $6.11 or 6.5 per cent to $87.73 while in New York, Mosaic (NYSE:MOS) tumbled $12.93 or 24.3 per cent to US$40.28.
The three companies have major potash operations in Saskatchewan, which has one of the world’s largest deposits of the mineral – a main ingredient used in fertilizers used to promote crop growth.
PotashCorp is the largest and best-known of North America’s potash producers and the largest partner of Canpotex, a company set up to market the three companies’ products in export markets such as China.
However, Uralkali is a major rival – especially in major export markets such as China – and its marketing partner.
Uralkali CEO Vladislav Baumgertner said in a statement posted on the company’s website that the Russian company has supported a united sales network but that has been upset by a Belarusian presidential decree in December and sales by Belaruskali outside the marketing partnership.
“Unfortunately, we should state that our cooperation with our Belarusian partners within BPC framework has come to a deadlock,” Baumgertner said in a statement.
He said Uralkali had “repeatedly informed” its Belarusian partners that such actions “were unacceptable and they have ultimately destroyed the fundamentals of our prolonged fruitful cooperation.”
“In this situation we have to re-direct our export deliveries through our own trader,” he said, adding he wouldn’t exclude the possibility of cooperation on a mutually beneficial basis in future.
PotashCorp was also the focus of an attempted high-profile foreign takeover by BHP Billiton, an Anglo-Australian mining giant that eventually backed away after the federal government said the deal wouldn’t be in the national interest.
Uralkali has a share of about 20 per cent of global potash production.
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