Will 2014 Include Russian-Belarus Potash Cartel Revival?

A little hope was poured into the potash market at the end of December with speculation that the Russian-Belarusian marketing arm for potash could be reassembled in the future. 
In December, Potash Investing News spoke with John Chu, an analyst at AltaCorp, who said that a reunion of Uralkali (MCX:URKA) and Belaruskali would support potash prices and promote supplier discipline within the market.
Following the August arrest of Uralkali’s CEO, Vladislav Baumgertner, Russian tycoon Suleiman Kerimov was on the lookout for buyers of his 21.75-percent stake in Uralkali. On December 20, Kerimov’s search ended with a couple of larger-than-expected deals that resulted in 47 percent of Uralkali being divvied up between two billionaires: Mikhail Prokhorov and Dmitry Mazepin. Prokhorov’s Onexim Group scooped Kerimov’s 21.75-percent stake in Uralkali, while another 5.34 percent was purchased by another Prokhorov-controlled company. Meanwhile, Uralchem, a company owned by Mazepin, closed a deal for nearly almost 20 percent of the remaining Uralkali shares.
VTB Capital analyst Elena Sakhnova said that the share restructuring “is positive for Uralkali as there will be more clarity in the situation for investors,” adding that “[i]t is also good that Prokhorov will have a larger stake than Mazepin, as he has a stronger financial position and we can expect that there will be less pressure on the company in terms of dividend payments and buybacks compared with what we saw before.”
Following the redistribution of the company’s shareholders, Dmitry Osipov was named as CEO of Uralkali. With the dust settling for the Russian potash company, 2013 ended with the hope that 2014 will see a revival in the marketing partnership between Russian and Belarus.
“The decision to appoint a new CEO has been taken in connection with the recent changes in the composition of the major shareholders of the company,” Alexander Voloshin, chairman of Berezniki-based Uralkali, said. Meanwhile, Russian ambassador to Belarus, Alexander Surikov, said that following the switch up in shareholders and the CEO, “Uralkali is ready to restore cooperation with Belaruskali,” a move he believes will be beneficial to both sides.
Sakhanova also commented on Osipov’s appointment at the helm of Uralkali, stating that now “the main people Belarus did not want to work with are gone from Uralkali, so we expect a prompt return to cooperation,” adding, “[t]his is positive for the whole industry, as it would herald a return toward a more lucrative price-over-volume strategy.”
What will a reunion mean for potash?
From our December interview with Chu, a reunion of of the Belarus Potash Company would create underlying support for potash prices. That should be good news across the board for potash companies.
In a January 8 article from Yorkton This Week, the news that Uralkali and Belaruskali could recombine has been well received. While a reunion between Uralkali and Belaruskali won’t exactly translate into Potash Corp of Saskatchewan (TSX:POT,NYSE:POT) rehiring all of its laid-off employees, the news has offered Saskatchewan some encouragement that potash production could be picking up in the future.
 
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned. 
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