A.Rudakov / Bloomberg

On the morning of July 30, 2013, Uralkali CEO Vladislav Baumgertner announced that the company was withdrawing from its joint trader with Belaruskali, the Belarusian Potash Company, and would pursue a policy of increasing production regardless of prices. Since then, Baumgertner has spent a month in a Belarusian prison and is now under house arrest, while the owner of Uralkali's majority stake, Suleiman Kerimov, has been placed on an international wanted list by the Belarusians.

Now Uralkali has published the results of the third quarter of 2013 on its website. Production increased by 11% compared to the second quarter of 2013 (to 2.7 million tons) and by 5% compared to the third quarter of 2012.

In the first nine months of 2013, production fell by 2.7% compared to the first nine months of 2012 (to 7.2 million tons). Uralsib Capital analyst Denis Vorchik is confident that if the company operates at full capacity in the fourth quarter (which has not happened since 2011), it will be able to extract the declared 10.5 million tons in 2013. “But potash companies’ production must be supported by demand, and it leaves much to be desired,” warns Vorchik.

Uralkali has already had to reduce prices on potassium chloride for Indian consumers by 12% to $375 per ton, the company's sales and marketing director Oleg Petrov told Interfax. This happened mainly due to the devaluation of the Indian rupee (it fell 11.78% against the dollar - Vedomosti).

According to Raiffeisenbank analyst Konstantin Yuminov, the situation could repeat itself in Brazil, where the real has fallen by 7.44% against the dollar. "In the third quarter, there was virtually no increase in potash imports in Brazil; farmers have adopted a wait-and-see attitude, as have large buyers in India. They are waiting for the potash price to drop to $350 per ton. Chinese buyers are hoping to see prices from $300 to $320 per ton," says Yuminov (see chart).

"Global producers are not in a hurry to lower prices yet; they are not sure that Uralkali will continue its policy of increasing production at the expense of price," Vorchik is sure. "This depends largely on who becomes the company's new shareholder."

In early September, lawyer Alexander Dobrovinsky reported that Kerimov was selling a large block of shares (or all shares - 21.75%) of Uralkali to Vladimir Kogan. Later, information emerged that there was more than one contender for a share in the Russian company. In September and October, Vedomosti sources close to Uralkali and state banks stated that state-owned Rosneftegaz, whose board of directors is headed by Rosneft President Igor Sechin, Mikhail Prokhorov's Onexim, Arkady Rotenberg, and Vladimir Yevtushenkov together with Mikhail Gutseriev were interested in a share in the company.

Foreign investors have also expressed interest in Uralkali. The Chinese sovereign fund Chengdong Investment Corporation converted Uralkali bonds issued in the spring of 2012 into 12.5% of its shares, thus becoming one of the company's largest shareholders.

But Kerimov's stake in Uralkali will most likely be bought by an investor from Russia, The Wall Street Journal writes, citing people informed about the negotiations. The newspaper also knows that foreign investors have also shown interest in this asset, but the Kremlin, according to its information, made it clear to the buyers that after the deal, regardless of its outcome, it will be necessary to restore cooperation with Belarus in the sales sphere.

Uralkali's return to cooperation with the Belarusian Potash Company and joint trading will not change the balance of power on the world market, Yuminov is sure. "The devaluation of national currencies, and not Uralkali's intention to dump, is putting the greatest pressure on prices," he concludes.

Uralkali achieved its goal