Agrium says potash under pressure from Russian ‘soap opera’

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Russian departure from sales partnership now a diplomatic row

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 Oct. 8.

Prices for the crop nutrient have slipped since midsummer, when Russia’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.

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