By Nick Worth
It seems at times that events in faraway places have little impact on Holbrook, but when it comes to the world of potash mining, that is no longer the case. With the discovery of the potash resources in the Holbrook Basin and the plans to start mining it, Holbrook has now become part of a much bigger picture in the global potash markets.
Headlines were made in July when the Russian potash producer Uralkali split from its Belarus partners Belaruskali over accusations the latter was selling potash outside their joint agreement.
The result was chaos in the global potash market, as the Russian company Uralkali began offering its potash to China and India, both big consumers of the product, at extremely low prices.
“What you had was, essentially, a loose cannon that threatened to damage the global potash market by predatory pricing,” said Ken Bond, head of corporate development for Passport Potash. “It was the epitome of predatory pricing.”
Bond said Uralkali’s split from Belaruskali had a worldwide effect. In Canada, Potash Corp. of Saskatchewan Inc. announced it would cut about 1,045 jobs because of slow demand from emerging markets. According to Bond, those job cuts were a direct result of the Uralkali pricing practices.
He also remarked that some of the large potash consumers, such as China and India were putting off purchasing the product, playing the Russian and Belarus companies off against each other to see how low the price would go, thus lessening the demand for potash.
Bond said the unstable prices also had an adverse effect on other, smaller potash producers.
“They were trying to push some producers out of the market and guarantee that some projects would not be built,” said Bond. He added the Russian company was trying to sew up the China potash market for itself.
“The split has made raising money almost impossible,” Bond said. “Investors were scared. They got this deer-in-the-headlights look. If not completely scared off, they were at least frozen.”
But several turns of events seem to be bringing some sense of stability to the chaotic situation.
At the end of August Uralkali CEO Vladislav Baumgertner was arrested in Minsk on charges of abuse of power and was extradited to Russia in November. Now the company has been bought.
“Uralkali shares have been bought by extremely wealthy oligarchies,” said Bond. “There is a new board in place representing the new owners, and indications are they want to put the cartel back together.”
The new owners of Uralkali are reportedly ready to rejoin the cartel with Belaruskali. The effect of this is that the cartel, which used to control about 40 percent of world potash exports, will be back in business.
“After the change of owners-shareholders were replaced by Uralchem and interests of Mikhail Prokhorov and Uralkali is ready to restore cooperation with Belaruskali,” said Alexander Surikov, the Russian ambassador to Belarus.
In a news conference last Friday, Surikov said Uralkali’s leadership had “acted thoughtlessly and did not calculate all the consequences” from the breakup of the potash cartel. He went on to state that both sides were to blame.
“The joint marketing of potash fertilizers should be restored,” added Surikov. “Most probably this would happen.” Surikov noted that this would be advantageous for both sides.
“That would be good for us,” said Bond. “What it’s likely to do is take away a lot of the uncertainty that was created when this whole incident started.
“It was the uncertainty in the pricing,” Bond continued. “It was disrupting from the perspective that they were doing things just to be destructive. A lot of companies had to take a good hard look at their production. In putting that group back together you have reduced that mechanism.”
According to Bond, the change of leadership in the Russian company will have a positive effect worldwide.
“If nothing else it will bring a more unified pricing in the global markets,” he said.
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By Nick Worth