Uralkali signs contract to supply potash to China

Uralkali has signed a contract to supply potash to China in 2015. In the period April – December, the Russian company will supply China with 850,000 tons of potash at $315 per ton. For comparison, in 2014, Uralkali supplied potash to China at a price of $305 per ton, with the volume of deliveries being 700,000 tons.

China is the largest consumer of potash in the world, and thus the contracts with that country are usually concluded at the minimum prices possible, while all other buyers of fertilizers traditionally pay a bit more. 

Nevertheless, the increase in price that Uralkali was planning – from last year’s $305 to $ 330-335 per ton – never materialized. The contract price of $315/ton is the same as that of the Belarusian Potash Company (BPC), which managed to sign a contract with Chinese buyers before the Russian company. This was the same price that the Canadian company Canpotex got in its contract, which it signed after the BPC. Now we can expect that the price of the contract Uralkali will sign with Indian buyers may be at least 10% lower than last year’s $322/ton, writes BCS analyst Oleg Petropavlovsky in a review.

This year, Uralkali’s production volume will decrease by 16%, to 10.2 million tons, due to flooding of the Solikamsk-2 Mine, the company reported. Nevertheless, even with a reduction in capacity, Uralkali could have signed a contract for large volumes – about 1.1 million tons, if they would have been the first to conclude an agreement with Chinese consumers, says Elena Sakhnova analyst at VTB Capital. The BPC contract includes the supply of 1.7 million tons to China, if all options are exercised, and Canpotex – 1.8 million tons. China is the largest market for Uralkali – accounting for 19% of all sales of the company in 2014.

First published in Russian in Vedomosti.

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