Uralkali lifts potash game as 'overcapacity' looms

Uralkali, targeting leadership in world potash, revealed its output of the nutrient had edged 4% higher even as China defied common market thinking by revealing that sector may be about to produce too much for its own good.

The Russian group said its potash production had risen by 4% to 8.06m tonnes in the first nine months of 2011, a figure including output from peer Silivinit, which Uralkali took over in June.

The increase reflected further efforts by Uralkali, which claims by buying Silvinit to have overtaken Canada's PotashCorp to top rank in potash production, to cash in on higher prices of the nutrient, a spokesman told

Uralkali, which is bringing new mining operations onstream and is interested in taking control of regional rival Belaruskali, has ambitions to overtake PotashCorp in production capacity too.

PotashCorp, which sold 8.6m tonnes of potash last year, has capacity of 13.3m tonnes, but has plans to reach 17.1m tonnes by 2015, given a revival in demand which has returned most miners to full production.

Chinese ambitions

However, the expansion plans come amid a warning from China, the world's top potash consumer, of overcapacity ahead thanks to its own efforts to lift output and reduce its reliance on foreign shipments.

Wei Chengguang, chairman of China's potash industry association, told a conference in Shanghai that the country's potash production may hit 6m tonnes this year, and surge to 13.5m tonnes by 2015.

Coupled with foreign growth, China's expansion will leave the world with potash overcapacity in 2012-14, Mr Wei said.

Data doubts

The estimates contrast with those of PotashCorp, which sees China's potash production showing a small rise to about 4m tonnes this year, short of demand of potentially 11m tonnes.

And China looks set to rely overwhelmingly to meet demand, which equates to about 20% of global use.

"China's domestic production capability is limited and it will have to import approximately three-quarters of its annual requirements over the long term," PotashCorp said.

In London, Barclays Capital analyst John Clemmow said that China appeared to be considerably more upbeat on their potash production potential than external observers, raising doubts over the achievability of the projections.

"When it comes to things China imports, it may be wise to take Chinese data with a pinch of salt," he said.

Uralkali's depositary receipts, a proxy for shares, closed 1.0% higher at $40.40 in London.

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