Uralkali potash output grows - implying fall ahead

Uralkali revealed its best-ever quarter for potash production implying a sharp slowdown in output ahead if the group is to meet its downgraded volume target.

The Russian group which claims to be the world's largest potash company, with capacity of 13.0m tonnes, a little higher than that of Canada's PotashCorp said that it produced 3.1m tonnes of the nutrient in the April-to-June quarter.

That volume, up 29% year on year, was biggest since Uralkali in 2011 ramped up its size with the takeover of domestic rival Silvinit.

And it took to 6.0m tonnes the group's potash output in the first half of 2014, a rise of 35% year on year.

'Revenue maximisation'

The sharp increase in production reflects Uralkali's change in strategy announced in July last year when it quit the Belarusian Potash Company cartel, claiming its joint venture partner, Belaruskali, had been selling outside the consortium without consent.

Uralkali loosened in price discipline, revealing its willingness to lift production volumes to regain market share.

However, the group last month said it was scaling back its production forecast for 2014 by 1m tonnes to 11m tonnes, in an effort to give some support to prices.

"Our strategy is not 'volume over price', or 'price over volume' - it is a revenue maximisation strategy," Uralkali chief executive Dmitry Osipov told investors at a capital markets day.

"We believe that, with these 11m tonnes, we will achieve this goal."

The company said that, given the "greater stability" in potash prices, which have stabilised of late after plunging after the BPC break-up, it was "seeking to maximise its revenue through stimulating prices".

On Thursday, German potash producer K+S also highlighted that potash values had stabilised, saying that it was "even able to slightly increase prices in some markets".

Production fall ahead?

Uralkali's 11m-tonne target implies a drop in production in the second half of 2014 to some 5.0m tonnes.

Uralkali produced 5.5m tonnes in the second half of 2013.

The prospect of a slowdown contrasts with some signs of improved production among some other potash groups.

PotashCorp on Monday said that it was recalling 47 workers at its Lanigan mine in Canada's Saskatchewan province thanks to a "tight market" for granular potash, two weeks after, for the same reason, rescinding lay-off notices for 50 workers at a New Brunswick mine.

Uralkali shares stood 0.7% higher at 159.08 roubles in late deals.

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