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Uralkali upbeat on potash market after record half

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Uralkali underlined the revival in demand for potash, pegged world industry volumes in the first half of the year at a record high, as the fertilizer giant unveiled a smaller fall in earnings than investors had expected.

The Russian-based group - the world's biggest potash producer by production, at 10.0m tonnes last year, and capacity, at 13.0m tonnes – said that 2014 had been a "strong year for potash sales so far".

The return of customers who in the second half of 2013 delayed purchases, after Uralkali's break-up of the Belarusian Potash Company cartel sent prices tumbling, drove global industry sales to 33m tonnes, a record high and up 15% year on year.

"Several producers announced that they were fully committed for first half 2014 shipments," Uralkali said.

Market breakdown

The rise had been evident in "stronger-than-ever" sales in the European Union and former Soviet Union markets, where demand is seen growing to 10.6m-10.8m tonnes this year, from 10.2m tonnes in 2013.

In North America, where demand looks like remaining "solid", volumes "may return to the record high levels seen in 2010" of 9.8m-10.0m tonnes, while in Brazil, where demand is "significantly increased", sales are expected to set an all-time high of 8.6m-8.8m tonnes.

Indeed, in Brazil, "strong demand and limited availability of granular potash" has driven potash prices up some $35-40 a tonne so far this year, Uralkali said, in a somewhat more bullish assessment than that on Wednesday from Chilean rival SQM.

Uralkali acknowledged that a weak monsoon had led to "weaker-than-expected" demand in India, the second ranked potash importing country, but stood by a forecast nonetheless of world potash volumes hitting 56m-58m tonnes this year, up from 54m tonnes in 2013.

Indeed, "global potash demand in 2014 may exceed the 2011 level," of 57m tonnes, "which would set a new record.

"Increases are expected in all major regions, partially aided by restocking needs," the group said forecast that dynamic will "continue to support potash prices in major spot markets".

Profits drop

The upbeat market assessment came even as Uralkali unveiled a drop of 6.8% in earnings to $370.9m for the first half of the year.

Revenues rose 6.9% to $1.73bn, with a 42% rise in sales volumes more than making up for a drop in prices, which for Uralkali were 30% lower on export markets at $220 a tonne, although the lower values fed through into weaker margins.

However, the drop in profits was less than that expected by analysts, who have forecast earnings of $330m.

Nonetheless, Uralkali shares stood 0.4% lower at 141.27 roubles in late deals in Moscow, where stocks weakened overall, by 2.0% according to the Micex index, thanks to raised Russian-Ukraine tensions.


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