Russian potash firms seen gaining from high prices

YEKATERINBURG, Russia Jan 15 (Reuters) - Major Russian potash miners Uralkali (URKAq.L) and Silvinit SILV.RTS are set to enjoy a bumper 2008 as a 1 million-tonne-plus global deficit of the fertiliser drives prices to unprecedented highs.

Analysts said on Tuesday prices could rise as much as 90 percent this year as production would remain stable while farmers require more fertiliser to grow grain.

"Potash fertiliser prices rocketed upward in 2007, but demand for this product is not falling and that will lead to a long-term increase in prices," analysts from Lefko-Bank wrote. Shrinking world grain stocks, in part because of increased biofuel production, pushed world grain prices to record levels last year, giving farmers the incentive to use more fertiliser. Prices have soared accordingly.

Alfa Bank forecast Russian potash fertiliser prices would increase by between 81 percent and 90 percent this year, slowing to 12-14 percent growth in 2009. Long-term annual growth would be about 7 percent as production begins to catch up with demand. "Today, potash fertiliser markets are flourishing due to increasing demand for agricultural production and new uses such as biofuels," said Yelizaveta Tolstaya, marketing director for 2K Audit-Business consultancy.

"Of course, there's a question over how long such high demand can be sustained, but we don't foresee any decline yet."

Belarussian Potash Co, the joint venture between Belaruskali and Uralkali that markets the Russian firm's exports, last month raised its spot prices for Asian sales to $500 per tonne from $400 and has announced a similar increase to Brazil from March.

Silvinit does not disclose its sales prices, although the company's press secretary, Anton Subbotin, said: "Our prices are not lower than the market price." Russian production is not expected to increase drastically this year, company representatives and analysts said.

Uralkali's press secretary, Alan Basiyev, said the company forecast output of 5.3 million tonnes of potash in 2008, although its business plan for the year had yet to finalised.

Uralkali produced 5.12 million tonnes last year, up from 4.17 million tonnes in 2006. Silvinit produced 5.47 million tonnes last year and Subbotin said the company had no plans for any significant increase in 2008.

"Growth is possible, but not the priority. Our equipment was already working at full capacity last year," he said. (Reporting by Natalya Shurmina, writing by Robin Paxton)