By Allison Martell
Toronto, Oct 8 (Reuters) - The Russian potash “soap opera” could weigh on prices until demand rises substantially or producers shut some capacity, the chief executive of Canadian fertilizer company Agrium Inc said on Tuesday.
Prices for the crop nutrient have slipped since mid-summer, when Russian’s Uralkali OAO quit its export partnership with Belaruskali, owned by the Belarus government, saying it would seek to boost volume.
The business dispute quickly turned into a diplomatic row after the CEO of Uralkali was detained in August while visiting Belarus, which depends on income from Belaruskali.
“The soap opera in Russia, and I think that’s the best way to characterize it ... I don’t know how it’s going to play out,” said Agrium CEO Mike Wilson at the company’s investor day in New York.
Wilson said the structure of the market has to go back to where it was, and some producers need to shut capacity, or demand has to soar above 60 million tonnes. Otherwise, he said, prices will be under pressure.
In June, the International Fertilizer Industry Association forecast 2013 potash demand of about 33 million tonnes.
“I am a little more cautious than some of our competitors,” said Wilson, but added that he was optimistic over the long term. “There’s huge barriers to entry.”
Agrium is aiming to complete an expansion at its Vanscoy, Saskatchewan, potash mine by the end of 2014. The company has said repeatedly the project still makes sense at current prices.
Agrium is in the early stages of evaluating whether to restart an idled nitrogen plant in Kenai, Alaska, said Chief Operating Officer Chuck Magro, who is tapped to become CEO when Wilson retires at the end of this year.
The Kenai facility was idled in 2008 because of a shortage of natural gas.
“I just want to make this really clear. Today, there’s not enough natural gas to restart Kenai,” said Magro. “But there is a lot of gas drilling in the Cook Inlet again, and we are working with the gas companies to determine if there is a possibility to restart those assets.”
Magro said that determination should take about a year.
Shares fell 3.3 percent to C$87.50 on the Toronto Stock Exchange and 3.2 percent to $84.95 on the New York Stock Exchange.