The tumble in potash prices prompted by Uralkali's break-up of the Belarusian Potash Company cartel will not boost world sales – this year, least - the Russian fertilizer giant said, as it revealed the financial forces behind its decision.
Uralkali, which in July forecast a tumble of potentially more than 25% in potash prices after its exit from BPC, said that potash demand for the rest of this year would prove "strong".
But it kept at 53m-54m tonnes its forecast for world deliveries in 2013, reflecting in part "macroeconomic instability" in India, the second-ranked exporter, which has faced a tumbling rupee, and in part a stand-off by buyers waiting to see how far potash prices actually fall.
"The fact that some potash importers are holding off accepting further orders in anticipation of price developments could have a negative impact on the short-term demand," Uralkali said.
'Huge potash application potential'
However, the group forecast that further ahead lower prices would stimulate demand, pointing in particular to China, the top importer, India and South East Asia.
"These areas have huge potash application potential, with higher usage levels recommended by scientists," Oleg Petrov, the Uralkali head of sales and marketing, said.
"We believe that the market environment going forwards and will make potash fertilisers more affordable for farmers in these developing regions, and will ultimately further boost overall potash demand."
The comments came as the company threw light on the reason behind its decision to break up BPC, a joint venture with Belarus-based Belaruskali, which Uralkali said had been undermining prices by selling outside the cartel.
The company said that it had "ceded some of its market share" by, unlike some rivals, keeping a "disciplined approach to sales", allowing its volumes for the first six months of 2013 to fall by 800,000 tonnes to 4.3m tonnes .
With prices falling too, revenues dropped 28% to $1.61bn, and earnings halved to $397m.
However, Viktor Belyakov, the Uralkali finance director and acting chief executive, said that the group viewed "the medium term future with confidence" thanks to its focus now on volumes over maintaining price discipline.
"Uralkali is well positioned to maintain its market share in a competitive environment," Mr Balyakov said.
"We remain the industry leader in terms of production costs, and have clear geographic advantages and ability to sustain and further expand our capacity."