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FROM THE EDITOR Strategic Decisions in Moscow Rattle Potash Markets The "cartel" that sets prices for potash began to unravel at the end of July in Russia, causing market value to plunge. This is good news for farmers, not so good news for potash miners. The announcement by Russian potash producer Uralkali that it would withdraw from its sales partnership with Belarusian Potash Co. (BPC) attracted attention and Steve Fiscor/Editor-in-Chief agitated a somewhat calm sector of the mining business. According to Uralkali's CEO Vladislav Baumgertner, the company's cooperation with its "Belarusian partner" had reached a deadlock. He said Belaruskali had made a number of deliveries outside of the partnership with BPC and that violated the underlying principles of their agreement. "We have repeatedly informed our Belarusian partners that such actions were unacceptable and they have ultimately destroyed the fundamentals of our prolonged fruitful cooperation," Baumgertner said. Uralkali currently produces about 20% of the world's potash. The company will no longer limit production and it will now export product through its own subsidiary, Uralkali Trading. The company operates five mines and seven processing facilities situated in the towns of Berezniki and Solikamsk (Perm Territory, Russia). The announcement had an immediate negative effect on share prices for publicly listed potash mining companies. The trading of Uralkali shares was briefly suspended in Moscow after falling 20%. In the short term, the decision could also drive potash prices lower. Uralkali itself forecast that the move could cause potash prices to drop 25% to roughly $300 per metric ton (mt). Uralkali and BPC had been partners for eight years and during that period saw potash prices rise as high as $900/mt just before the global financial crisis. The majority of the world's potash is sold through two marketing groups: BPC and North America's Canpotex. Canpotex represents Potash Corp. of Saskatchewan, Mosaic and Agrium. The two traders for years have set identical prices for major markets, hence the cartel reference. Uralkali pulling out of the arrangement would be similar to Saudi Arabia pulling out of the OPEC. For better or worse, Uralkali has caught the market's attention. Is this a tempest in a teapot—a $20-billion teapot—or is this decision going to considerably alter this market for the long term? The business press reacted sharply to Baumgertner's announcement. They see the move as placing the market in jeopardy and not adding to shareholder value, especially for Uralkali shareholders. Baumgertner sees the market differently and believes the company's decision was the proper course of action. He admonished them for only concentrating on the possible negative outcomes. Potash is a bulk commodity and the decision will immediately have a regional impact; Belaruskali may regret its decision to export product outside of the agreement. Baumgertner did not rule out reconciliation with BPC, but he did say it may be a future consideration. Meanwhile, he plans to grow Uralkali's production to 13 million mt/y this year from the current 9.1 million mt/y. Demand for potash worldwide will only grow along with the world's population. While the company's decision may seem reactionary in the short-term, it could be in the company's best interest to break free of the cartel and assert itself as the global leader it is. ENGINEERING AND MINING JOURNAL www.mining-media.com Mining Media International—Editorial Office 11555 Central Parkway, Suite 401; Jacksonville, Florida 32224 USA Phone: +1.904.721.2925 / Fax: +1.904.721.2930 Editor-In-Chief—Steve Fiscor, sfiscor@mining-media.com Managing Editor—Russ Carter, rcarter@mining-media.com European Editor—Simon Walker, simon.emj@btinternet.com Latin American Editor—Oscar Martinez, omartinez@mining-media.com South African Editor—Gavin du Venage, gavinduvenage@gmail.com Australian Editor—John Miller, john@asiaminer.com Associate Editor—Gina M. Tverdak-Slattery, gtverdak@mining-media.com News Editor-Mining—Joe Kirschke, jkirschke@mining-media.com Assistant Editor—Jennifer Jensen, jjensen@mining-media.com Graphic Designer—Tad Seabrook, tseabrook@mining-media.com Mining Media International—Corporate Office 8751 East Hampden, Suite B1; Denver, Colorado 80231 USA Phone: +1.303.283.0640 / Fax: +1.303.283.0641 President/Publisher—Peter Johnson, pjohnson@mining-media.com VP-Sales and Marketing—John Bold, jbold@mining-media.com Midwest/Eastern U.S. & Canada, Sales—Victor Matteucci, vmatteucci@mining-media.com Western U.S. & Canada, Sales—Mary Lu Buse, mlbuse@mining-media.com Scandinavia, UK & European Sales—Colm Barry, colm.barry@telia.com Germany, Austria & Switzerland Sales—Gerd Strasmann, info@strasmann-media.de Australia & Asia Sales—Lanita Idrus, lanita@mining-media.com Japan Sales—Masao Ishiguro, ishiguro@irm.jp Indonesia Sales—Dimas Abdillah, dabdillah@mining-media.com Classified Advertising—Norm Rose, nrose@mining-media.com Ad Traffic Manager—Dan Fitts, dfitts@mining-media.com Engineering & Mining Journal, Volume 214, Issue 8, (ISSN 0095-8948) is published monthly by Mining Media, Inc., 10 Sedgwick Drive, Englewood, Colorado 80113 (miningmedia.com). 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