China Drying Network According to "Financial Times" report, on Tuesday, Uralkali, Russia's largest potash fertilizer company, announced that it will withdraw from BPC (BelarusPotashCorporation), one of the world's two largest cartels of potash fertilizer.
According to Urals CEO Lajslaw Baumgartner, the reason for the withdrawal was that another member of the above-mentioned coalition, the Belarusian National Potash Fertilizer Plant, violated the agreement and sold the potash away from the Union. Therefore, the Ural also decided to sell it on its own. It will also focus on expanding production and increase its 2015 export target from 10.5 million tons to 14 million tons. When this news came out, it triggered a strong earthquake in the global stock market's fertilizer sector, and the share price of many potash producers plummeted.
As the lowest cost producer in the world, Ural’s exit has had a huge impact on the global potash fertilizer market. Some analysts even compared the impact to that year’s “Saudi withdrawal from OPECâ€.
Analysts in the industry interviewed by the reporter of the “Daily Economic News†said that the international potash monopoly situation has been dismantled, and the trend of general sales has gone in the future, and the follow-up market will fully introduce the competition mechanism.
Several potash producers have plummeted
Once the Ural withdrawal message was made public, it was like putting a heavy bomb on the international market, which also caused the entire stock of potash stocks to plunge.
Among them, Ural's share price fell by 17%, while German K+S and ICL-Israel Chemicals also fell by 19% and 18% respectively.
Potassium-related producers in the US market were also dragged down. Mosaic shares fell 22%, Agrium shares fell 7.7%, and Potash Corp of Canada fell. twenty three%. For this scene, Joel Jackson, an analyst at Bank of Montreal in Canada, said, “The potash market pattern we knew in the past was over.â€
It is reported that at present there are two monopoly alliances in the global potash fertilizer market, one is the Russian BPC and the other is North American Canpotex, and this alliance includes Mosaic, Potash Corp and Agrium. It is these two major alliances that control the global price of potash fertilizer at a level far exceeding the production cost, and thus bring huge profits to these potash fertilizer companies. As a major member of the BPC, Urals from Russia is one of the world's largest producers of potash fertilizers, and their production accounts for about 20% of global potash fertilizer production.
Just a few years ago, the price of potash had once approached the high of $900/ton. According to Ural CEO Baumgartner, after exiting the monopoly alliance, potash prices are likely to fall from the current 400 US dollars/ton to 300 US dollars/ton, a drop of 25%, but still higher than some international fertilizer companies 200 Dollar production costs.
Although Baumgartner said that it is not clear how the company’s change in sales strategy will affect the market, his prediction is not unreasonable because global supply of potash is surplus. .
The latest global potash fertilizer industry outlook analysis report released by the Canadian Imperial Bank of Commerce stated that “the entire market will continue to oversupply in the coming years, which means that prospects for future potash prices will depend in part on whether producers can maintain current production conditions. â€
Price war is imminent
The collapse of monopolistic alliances will lead to more extensive competition in the market, and this will undoubtedly be a serious blow for the higher-cost potash producers. However, for the Urals, due to their extremely low production costs, they will be very May become the ultimate winner of the price war.
Goldman Sachs reported that “This decision of the Urals not only means that competition in the potash industry will intensify, but also may cause the price of potash to be drastically reduced to a marginal production cost of around US$300/ton, while the Ural is the world’s lowest-cost producer of potash fertilizer. The company's delivery costs are $171/ton, and the industry average is $240/ton."
This industry shock has also paralysed the mining giant BHP Billiton, a long-time potash fertilizer industry. Its $14 billion potash investment program in Saskatchewan, Canada, has stalled due to a price war.
"The withdrawal of the Ural will break the existing tacit understanding and monopoly of the global potash market, and it will raise the horn of the price war in the potash market. It is expected that other manufacturers will follow Ural to join the price competition." Lu Yuanzhou, Petrochemical Industry Analyst, CBI Research Center Indicated.
According to statistics, the consumption of potash fertilizer in China, India, and Brazil each year accounts for about 60% of global production. In order to obtain resources, it has to pay high purchase prices.
As one of the world's largest potash fertilizer demand countries, how will this industry change affect the Chinese market? In response, Zhao Tingting, an analyst at the business community potash fertilizer industry, told the Daily Economic News reporter: “In the second half of this year, the price of potash fertilizer should not be affected too much, because China will follow several large international potash fertilizer production every year. Negotiations are generally carried out in the second half of the year and are shipped monthly. After Ural withdraws from the monopoly alliance, a large supplier has been added to China. Therefore, in the next year's negotiations, the price of potash will surely be depressed."
In this regard, Zhuo Chuang Information Potash Fertilizer Analyst Li Feng is even more bluntly: “For China, India, and Pakistan, the three major demand countries, the withdrawal of the Urals is undoubtedly a major positive. After the independence of the Urals, the international potash monopoly form will be weakened. With regard to single-contract negotiations, the chips in our hands will increase, and the balance of interests will tend toward us."
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