Here comes potash: Belarus looks for a deal, rejects price war

Chris Parry
1 Comment|September 23, 2013

It's always darkest before the dawn. Here comes the sun.
Potash has a pulse, and Belarus just gave it a little mouth-to-mouth resuscitation.
 
Since the break-up of the Belarus-Russia potash sales cartel, there’s been much drama, arrested CEOs, threats of price wars, hurt feelings, some spilt milk, and a lot of share value wiped in North American potash stocks.
 
But potash prices have held. And now, the potash honchos of Belarus appear determined not to succumb to the much anticipated price drops talked about in the aftermath of their breakup last month, with Belarus Deputy Prime Minister Vladimir Semashko stating last week, “(We) are not prepared (to lower prices). Any decrease would mean a loss.”
 
They also said, according to Reuters, that they are willing to cooperate with Uralkali in the future “in any format” when asked if a new joint venture were possible.
 
Uralkali (OTO:URALY, Stock Forum) CEO Vladislav Baumgertner is sitting in a jail cell right now, while Uralkali’s largest shareholder is dumping his shares in the firm.
 
Clearly, the impediments to a deal are, more or less, removed from the process.
 
The importance of this should not be discounted: Belarus is not prepared to engage in a price war, and the guy who wanted one is getting three hots and a cot.
 
Meanwhile, back on the ranch in Canada, the producers supplying Canpotex are hurtin’ for certain, with share prices battered and uncertainty rife. There are reports that Indian buyers are seeking discounts on potash sales going forward, and Agrium has predicted a 30% drop in potash sales for the coming quarter, based on the global uncertainty Uralkali created.
 
But nobody is running. Potash projects are going forward. BHP Biliton (NYSE:BHP, Stock Forum) is pumping $2.6 billion into a Saskatchewan potash project, and if the vodka crowd get their act together, one might expect the stock losses of the past two months to quickly turn around with investment profits aplenty to be had.
 
When Agrium (TSX:T.AGU, Stock Forum) announced their 30% sales drop, they also announced a 50% increase in their dividend, and their share price barely nudged a point. The giant Potash Corporation (TSX:T.POT, Stock Forum) is also forking over dividends.
 
Karnalyte Resources (TSX:T.KRN, Stock Forum), which fell off a cliff when the Uralkali announcement came, plummeting from around $5.60 to the current $1.90, just announced they’ve been authorized to proceed to the construction permitting process for the Wynard Carnalite project.
 
Pacific Potash (TSX:V.PP, Stock Forum) is set to merge with Cowley Mining to become the largest publicly listed land holder in the Amazon potash basin.
 
Passport Potash (TSX:V.PPI, Stock Forum) is extending option agreements despite shares having dropped from $0.18 pre-Uralkali to $0.10 now, while Western Potash (TSX:T.WPX, Stock Forum) is paying stock options despite the Uralkali bombshell taking $0.15 off their former $0.55 share price.
 
What it comes down to is, nobody’s ready to take a position one way or another on potash, except the CEOs of the potash producers, who continue to say ‘nothing to see here.’ Shareholders who didn’t freak out on cartel-split day are sitting tight and waiting for the bounce.
 
People gotta eat, and fertilizer is a necessary part of helping that happen. All that’s missing is that single piece of news from Eastern Europe that someone wants to get out of prison enough to do a deal, and the entire industry could go nutty upward overnight.
 
And that day will come. Do your research. Pony up. Potash is coming back.

FULL DISCLOSURE: Pacific Potash, Western Potash, Karnalyte and Passport Potash are clients of Stockhouse Publishing.

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LBL1111
You forgot Encanto Potash (EPO.v)...already shot up and is still going.......what a deal!!!
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September 25, 2013
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