BELARUS NEWS AND ANALYSIS

DATE:

07/11/2007

Belarus potash venture resumes sales, ups prices

By Robin Paxton

MOSCOW, Nov 7 (Reuters) - Russian potash miner Uralkali (URKA.RTS: Quote, Profile, Research) said on Wednesday its Belarussian export venture, the world's largest supplier of the mineral used in fertilisers, was resuming sales after a 12-day stoppage, and raising prices.

The resumption comes a day after rival Russian producer Silvinit (SILV.RTS: Quote, Profile, Research) said it was shipping potash as normal as a sinkhole that had threatened to sever its only rail link was advancing more slowly than had previously been feared.

Belarussian Potash Co (BPC) suspended new sales on Oct. 26 in response to the supply threat from Silvinit (SILV.RTS: Quote, Profile, Research), which supplies over 10 percent of the world's potash, and after Potash Corp of Saskatchewan (POT.TO: Quote, Profile, Research) (POT.N: Quote, Profile, Research) had done likewise.

Fertiliser supplies were already tight worldwide, with North American inventories at record lows, due to strong demand for grains for food and biofuels. Fertiliser company stocks rose sharply to new records after the suspension of new sales.

"There's been something of an over-reaction to the situation," Yelena Sakhnova, director for industrial fertilisers and transportation at Deutsche Bank in Moscow, told Reuters.

"I strongly believe in the fundamentals of the potash market long-term. Near-term, the risks are more on the downside, as share prices have gone so high," she said.

Uralkali's London-listed stock (URKAq.L: Quote, Profile, Research) rose 11 percent immediately after it announced the halt to new contracts. Potash Corp's Toronto-listed shares are up more than 6 percent.

Uralkali did not give a reason for the resumption of sales in a statement accompanying the price rises. A BPC official said the decision had been taken after studying the market.

On Tuesday, Silvinit spokesman Anton Subbotin said the company was shipping its usual 15,000 tonnes a day of potash and that the sinkhole in Perm region -- the result of flooding at Uralkali's nearby Mine 1 -- was advancing slower than feared.

Perm regional authorities have also said an emergency rail spur could be laid by Jan. 1. [ID:nL06524743]

"This new bypass link reduces the risk of a potential interruption in potash shipments from Silvinit," JPMorgan said in a note.

PRICE RISES

Uralkali said in the statement that BPC had raised potash prices in spot Asian markets with immediate effect to $400 per metric tonne from $360, including cost and freight.

BPC is also raising the price it charges for sales in the Brazilian spot market to $400-410 for deliveries after Jan. 1, 2008 from $345-$355 now. Price will depend on customer size.

"BPC has informed Uralkali that the price increases are driven by strong demand for potash in its major markets versus tight supply characteristics and also as a result of increased freight rates," Uralkali said in the statement.

The price rises also precede annual contract negotiations with China, the world's largest potash buyer in terms of volume. China currently pays about $100 per tonne less than spot prices for the fertiliser, and settles prices net of freight costs.

Deutsche Bank's Sakhnova forecast 2008 prices with China would increase by $60 per tonne, below market consensus that prices will rise by $80 to $100.

"China has never been on par with the rest of the world. They are always at discount," she said.

(Additional reporting by Douglas Busvine)

(Editing by Chris Johnson)

Source:

http://www.reuters.com/article/companyNewsAndPR/idUSL0781776420071107