MOSCOW, July 30 (RIA Novosti) – Shares in Russia’s Uralkali, the world’s second-largest producer of potash, nosedived more than 25 percent Tuesday, wiping over $4 billion from the value of company, after Uralkali said it was quitting an industry cartel, in a move that is likely to mean increased global competition and a fall in the price of the fertilizer.
Trading in Uralkali shares was halted for 30 minutes on the Moscow Exchange at 2:58 p.m. after the speed of the stock’s fall triggered a technical freeze mandated by Russian law.
Uralkali’s cooperation with its Belarusian partner, Belaruskali, had reached “deadlock,” Uralkalki CEO Vladislav Baumgertner said in a statement posted on Uralkali’s website Tuesday.
As part of a cooperation agreement, Uralkali and Belaruskali had previously worked together under the aegis of the so-called Belarus Potash Company, and channeled all their exports through one trading company. But Baumgertner said that Belaruskali had started to sell potash independently last year and, in doing so, “destroyed the fundamentals of our prolonged fruitful cooperation.”
International potash production companies have for years focused on prices – rather than volume – as a strategy to maintain profits. Russia has about a third of the world’s proven reserves of potash, a mineral that enhances crop yields and is imported in large quantities by emerging markets like China, Brazil and India.
Other potash production companies around the world also fell in the wake of Uralkali’s announcement. German potash supplier K+S plunged almost 20 percent in Frankfurt.
Prices for Potash, currently at about $400 a ton, could fall as low as $300 a ton this year, Baumgertner said during a conference call Tuesday. The company also announced a 500,000-ton 2013 export contract with China.
Uralkali plans to run at full capacity and increase production to 10.5 million tons this year, 13 million tons in 2014 and 14 million tons in 2015, Baumgertner added.
Uralkali’s share price later pared losses, closing down 17.5 percent at 153. 8 rubles in Moscow. By 3:45 p.m. in London, where Uralkali is also listed, its shares had fallen 19 percent.
Investor sentiment on Uralkali has been soured in recent months with the exit of some major shareholders. Last week billionaire Alexander Nesis announced that he had sold his 5.1 percent stake in Uralkali, and the company bought out billionaire Zelimkhan Mutsoev's 6.4 percent stake in June.
Currently in the midst of a $1.6 billion share-buyback scheme, Uralkali is 17.1 percent owned by billionaire Suleiman Kerimov and has a 58.5 percent free float, according to its website.