UPDATE 2-Belarus surprises rivals with China potash deal

Thu Mar 19, 2015 11:08am EDT
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* BPC deal is first for 2015 with major importer China

* Potash is key currency earner for struggling Belarus

* Bigger rival Uralkali criticises hike as too small (Writes through, adds quotes from Belarus, Uralkali)

By Andrei Makhovsky and Polina Devitt

MINSK/MOSCOW, March 19 (Reuters) - Crisis-hit Belarus reached an unexpected agreement with China on Thursday over 2015 prices for the crop nutrient potash, undercutting Russian and North American rivals who were negotiating for higher rates.

Potash prices collapsed after Russia's Uralkali broke away from a joint trading venture with the Belarussian Potash Company (BPC) in 2013. They have failed to fully recover, amid competition between global producers who had previously maintained high discipline on pricing.

Thursday's deal makes it harder for the likes of Uralkali, U.S.-based Mosaic Co and Canada's Potash Corp of Saskatchewan and Agrium Inc to agree on a higher price, as the first contract with China sets a benchmark for others. China is the world's biggest consumer.

Potash sales are a key source of foreign currency for former Soviet Belarus, whose economy has been hit by the conflict in neighbouring Ukraine and the plunge in the value of the Russian rouble. The government is planning to ask the International Monetary Fund for a new financing package.

"Every $10 million on account is a big bonus for the government in the current situation," said Yaroslav Romanchuk, the head of the Mizes think-tank in the capital Minsk.   Continued...