Belying expectations, the Russian potash cartel of Uralkali JSC (LSE: URKA) and Belarusian Potash Company (BPC) will not be reconstituted, according to media reports. This is bad news for the global potash industry and Israel Chemicals Ltd. (TASE: ICL).
Kommersant reports, "The heads of Uralkali and BPC had the first personal meeting for the last six months. The sides didn't discuss resuming the cooperation… On the contrary, they spoke about Uralkali's possible exit from inactive ZAO BPC that had been a joint trader until August 2013. The companies have no intentions to work on old arrangements in spite of the change in Uralkali's shareholders and the calming conflict."
The report is referring to the acquisition of 22% of Uralkali by Onexim Group, controlled by Mikhail Prokhorov from Suleiman Kerimov. It had been hoped that the deal would stabilize the global potash market, which was shaken by the breakup of the Russian potash cartel in July 2013.
Market worries that the breakup would cause potash prices to plummet have materialized. In January 2014, Uralkali, the world's largest potash producer, announced a Chinese contract at a price of $305 per ton, 24% less than the previous contract from July 2013. Before July 2013, potash prices were $400 per ton.
Published by Globes [online], Israel business news - www.globes-online.com - on February 5, 2014
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