Is the Russia-Belarus potash war over?

Chemicals , Commodities , Europe , Potash Nov 18, 2013 No Comments

OneximThe Russia-Belarus potash war could be ending as Suleiman Kerimov, the Russian oligarch and primary shareholder of the world’s largest potash miner Uralkali, has agreed to sell his 21.75 per cent stake to billionaire businessman Mikhail Prokhorov, in a move which is likely to calm tensions between Russia and Belarus.

The potash industry has been in disarray since Uralkali announced in late July that it was leaving a trading partnership with Belarus which controlled around 40% of the world’s trade in the fertilizer ingredient. The move effectively ended an informal global pricing cartel, sent potash prices tumbling and stock prices for the world’s top producers into a tailspin. 3 weeks later, China‘s sovereign wealth fund (CIC) acquired a 12.5 percent stake in Uralkali.

The purchase of the stake in Uralkali is a long-term investment in a company that is unique from the standpoint of its position in its industry and its role in the world economy. We are certain that the potash industry has strong fundamentals and that Uralkali, as the world’s leading producer and the key player in the industry, has considerable potential for growth in value. ONEXIM Group, in turn, has extensive experience in managing major industrial assets and creating shareholder value in public companies” – said Dmitry Razumov, CEO of ONEXIM Group.

The deal was blessed by President Vladimir Putin, sources familiar with the matter said, in a bid to repair ties with Belarus President Alexander Lukashenko. Russia’s ally had arrested Uralkali‘s boss after the Russian firm quit the marketing pact.

Kerimov’s exit from the company has been laid out as a condition for the reunification of Belarus fertilizer company Belaruskali and Uralkali. Belarus President Alexander Lukashenko said cooperation between the two potash producers could only continue if Uralkali has new ownership.

The transaction will be finalized next week and no terms will be disclosed. Kerimov’s share is worth $4.35 billion, Vedomosti reports, on the assumption the company is valuated at $20 billion. Uralkali extended gains in Moscow trading and was 2.7 percent higher at 179.83 rubles on Friday. Its depository receipts declined 0.1 percent to $27.70 in London. The yield on Uralkali’s eurobond due in 2018 declined 20 basis points, the most since Sept. 19 on a closing basis, to 4.89 percent.

Despite the sale, Uralkali, which opted to increase production to recover its market share which it had lost earlier this year, is expected to continue its strategy for now. On the revival of the BPC export cartel, Paul Ostling, a non-executive director at Uralkali said there was no offer on the table from Belaruskali at the moment: “It’s difficult to get Humpty Dumpty back together. We’ve created an omelette.”

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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