MOSCOW (Reuters) - Russia’s Uralkali URKAq.L (URKA.MM) could discuss joining with Belarus in a Swiss-based trading company to export potash, but will not return to the Minsk-based venture which broke apart on Tuesday, the Russian firm’s CEO said on Wednesday.
Uralkali quit Belarusian Potash Company (BPC), one of the world’s two big potash concerns on Tuesday, and said it would funnel sales through Swiss-based Uralkali Trading, heralding a price war for the key crop nutrient and pummeling the shares of companies that produce it.
Uralkali predicted that its breakup with BPC would cause the global potash price to fall by 25 percent to below $300 per tonne in the second half of 2013. Analysts fear it could also halt global potash projects.
“We had no other choice,” chief executive Vladislav Baumgertner told Reuters in an interview on Wednesday.
“If it were possible to continue the strategy of ‘price over volume,’ we would continue it. But it was impossible to do so when Belaruskali sales through BPC were not exclusive,” he said.
He added that the decision was motivated by business interests and denied any political motive in Uralkali’s move.
“We, by no means, plan to be a part of BPC again,” he said.
“Potentially, in the future we could discuss cooperation with Belaruskali with the base being (trader) Soyuzkali, with Swiss jurisdiction on mutually beneficial terms,” CEO said.
Uralkali and Belaruskali had plans to create a Swiss-based Soyuzkali trading house instead of Minsk-based BPC about two years ago, but the company was never registered.
The potential Swiss-based trader should be an exclusive sales channel for Belaruskali, but there are no discussions on the matter now, he added.
“Even if these discussions begin, and they have not started, the process would take a long period of time,” Baumgertner said.
Uralkali hopes that higher sales would compensate for the expected price fall, while cheaper potash would boost consumption in price-sensitive Asian markets.
Global potash demand will rise to 59-60 million tonnes in 2014 from 54-55 million tonnes in 2013, Uralkali’s CEO said.
Uralkali plans to increase potash supplies to China to 3.5-4 million tonnes in 2014, Baumgertner added. The company plans to supply 2.5 million tonnes by rail in 2013.
BHP Billiton (BLT.L) is weighing the fate of a $14 billion Canadian potash project just as the collapse of the venture puts more pressure on already weak prices.
Uralkali also believes new global potash projects will be delayed after the price fall, the chief executive said.
“I have not the slightest doubt about that. We are talking about multi-billion dollar investments, and I could not imagine a company that would be approve such projects in the current price environment.”
Reporting by Polina Devitt; editing by Megan Davies and David Evans