Potash fertilizers have created cause for concern

In May 2013 potash production decreased by 39.4% compared to May 2012.

Potash fertilizer is one of the few productions that have the export growth potential in 2013. In Q1 2013 potash production, along with dairy production, was leading in providing exports’ growth. The uncertainty with supply to China in Q3 and Q4 2013 may worsen the performance results and reduce the industry’s exports growth in value terms to zero.

Belarus has few exports that have a decisive influence on the currency proceeds’ volume. These exports include oil, potash and nitrogen fertilizers, trucks, agricultural machinery and dairy products. Petroleum products exports depend on oil prices and oil supply to the refineries. Dramatic increase in the oil products output is not feasible, and refineries’ modernization is expensive and time-consuming. Engineering products’ exports in 2013 declined significantly amid falling demand for investment goods in Russia. Apart from dairy products and fertilizers’ exports, other industries (even if exports increase) will not have a strong influence on Belarus’ foreign trade situation.

In Q1 dairy products exports were USD 140.9 million, potash – USD 68.7 million. However, in May, the situation with potash fertilizer exports has changed. Potash exports are strongly linked with their production, and the bulk of fertilizer is sold in foreign markets. In May potash production decreased by 39.4% compared with May 2012 and by 21.3% in April. In April, exports to China were suspended and exports to India are insignificant. Only the Brazilian market helped to keep the positive dynamics in potash exports.

A world leader in potash fertilizer’s production, Uralkali’s management stated that new contract with China would not be signed before October 2013, which did not add optimism to grow potash exports in 2013. Belarus hoped to compensate the price reduction by 17% in the potash contract with China with increased supply volumes. However, exports volumes’ maintenance is now questionable. Only increased supply to the Brazilian market would able to ensure potash exports growth, but if protest waves in Brazil continue, the supplies there might be affected.

Thus, Belarus’ potash exports are in a difficult situation. As of July 2013 compound fertilizers exports might improved the situation, on principle, potash fertilizers’ export plan will be difficult to fulfill. If negative developments persist, Belaruskali will have to reduce production output.