European potash shares slide as Russian rival flags price slump

Tue Jul 30, 2013 6:27am EDT
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FRANKFURT, July 30 (Reuters) - The breakup of the biggest player by volume in the global potash market, a Russian-Belarusian joint venture, triggered a slump in shares of European potash mining companies on Tuesday on fears of falling prices for the key fertiliser mineral.

Russia's Uralkali said it would no longer fix potash prices and volumes with Belaruskali, adding this may push global potash prices down below $300 per tonne in the second half of 2013 - a drop of more than 25 percent.

Shares in Uralkali plummeted 15 percent, while those of German rival K+S, the world's fourth-largest potash mining company, slumped 16 percent to a six-year low.

One trader described the news as "a catastrophe" for K+S, while Commerzbank analyst Lutz Grueten said a 1 percent decline in global potash prices translates into an average 2 percent drop in operating profit at the German miner.

K+S has said its C$4.1 billion ($4.0 billion) new mining project in Canada would require a price of at least $420-$460 per tonne of potash, including freight, to secure the project's targeted premium on costs of capital of 15 percent.

"If potash prices indeed fall below $300, a number of new mining projects in the industry would certainly be at risk," Metzler Equities analyst Lars Hettche said.

London-listed Sirius Minerals, which plans to build a $1.7 billion potash mine in North Yorkshire, fell 8 percent.

Israel Chemicals, which extracts the fertiliser mineral from the Dead Sea, slumped 15.2 percent.

The break-up of the Belarus Potash Company (BPC) leaves North America's Canpotex as the ruling potash export venture.

BPC and Canpotex had accounted for a combined 70 percent of global trade in potash, and the duopoly had set identical prices in key markets such as China and India. ($1 = 1.0261 Canadian dollars) (Reporting by Ludwig Burger and Daniela Pegna; Editing by Dale Hudson)