New Uralkali investor backs Belarus-Russia accord

Expectations of an end to the drop in potash prices hardened as the new shareholder in Uralkali signalled the potential for a Russian-Belarusian co-operation, which PotashCorp flagged as crucial for the market.

Dmitry Konyayev - chief executive of Uralchem, which bought 20% of Uralkali earlier this week - said that his company would support the resumption in potash of Russian-Belarusian ties, which were shattered in July, sending potash prices tumbling.

"It should be mutually advantageous partnership, and if the Uralkali management finds options to organise it, we won't object," Mr Konyayev said.

"We have respect for the Belarusian partner, a large player on the potash fertilizer market."

He added that "relations between Uralkali and Belaruskali should be based on [a] mutually advantageous basis".

Belarus-Russia rift

The comments follow the purchase by Russia-based Uralchem, which is controlled by Belarus-born Dmitry Mazepin, of its Uralkali stake in a move seen as an attempt to heal the Russia-Belarus rift caused by the break-up of the Belarusian Potash Company (BPC) potash marketing joint venture.

Russia's Uralkali quit the cartel in July, claiming that its partner in the tie-up, Belaruskali, was selling potash outside the venture, breaching an exclusivity agreement.

The break-up of a consortium which controlled more than 40% of world potash volumes sent the industry into turmoil, besides provoking outrage in Belarus, which arrested Uralkali chief executive Vladislav Baumgertner on charges of abusing his position as BPC chairman.

However, tensions have been eased by the decision of Suleiman Kerimov, who Minsk also threatened to arrest, to dispose of his stake in Uralkali, while two if his business partners sold to Uralchem.

'Recipe for a nice bounce'

Separately, Canada's PotashCorp, the world's biggest potash group by capacity, highlighted the potential for a bounce in prices next year provided Uralkali and Belaruskali indeed resolve their differences.

A potash supply contract potentially to be agreed by China, the top importer, early next year would herald better times.

"There's a recipe here for a nice bounce in the first half of next year," PotashCorp finance director Wayne Brownlee told an investor conference, in comments came the day after PotashCorp revealed it was to cut one-in-six of its staff and curtail output of potash and phosphate.

However, improved Uralkali-Belaruskali relations represented another ingredient.

"If there's no reconciliation between the Russians and Belarus, then the market still has the potential to dip," Mr Brownlee said.

Not so simple

Some commentators have taken a less optimistic view of a BPC reunion, saying such an outcome faces hurdles and, even if it is achieved, would not end the industry's problems,

Deutsche Bank analysts Bob Kommers said that while the exit of Mr Kerimov as a Uralkali shareholders "has increased the probability of a reunification of BPC, re-establishment of the co-operation may prove cumbersome.

"It would require Uralkali to cede the market share that it has taken from Belaruskali since the break-up end July.

Furthermore, the outcome for BPC "is unlikely to stop the downward trend in the potash price".

That decline "was primarily caused by industry overcapacity, falling crop prices and declining emerging market currencies and not by the break-up of BPC", Mr Kommers said.