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China-Belaruskali Deal Shakes up the Potash Industry

The decision of Belarus’ potash giant Belaruskali to sell its potash to the Chinese for $315 a tonne by mid-2015 has shaken up the potash sector as market prices are currently between $330 and $340 a tonne. The move will very likely have a negative impact on North America’s Canpotex and Russia’s Uralkali. The former is an exporting cartel consisting of PotashCorp, Agrium, and Mosaic, which was looking for a $25 rise on 2014 prices while Uralkali was seeking a $30 rise.

In addition to negotiating a price lower than the market’s average, Belaruskali also changed the common progression of talks with the Chinese. Canpotex and Beijing normally set a price, followed by BPC – a partnership between Uralkali and Belaruskali – which broke up in 2013. Oleg Petrov, head of Uralkali’s sales and marketing, said that the agreed price between Belarus and China was surprising. He said that the increase of $10 a tonne would “not provide the necessary support for the market” and added that “by waiting two to three weeks longer, the suppliers could have concluded a much more profitable contract”. However, according to analysts, this move is a signal that the potash market is getting increasingly competitive.

The Belarusian economy strongly relies on trade relations with Russia and thus it is going through hard times as a result of the sanctions imposed on Moscow. In order to help the economy, Belaruskali is operating at its maximum capacity. The company has also been pushing potash exports for a year. In 2014, its total exports went up by 65 percent compared to 2013 despite the fact that many major potash importers, such as Brazil, Indonesia, and India, had faced lower agricultural crop prices while China, another major consumer, has high potash inventory levels.

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