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ATON - Daily Dashboard, Chemicals and Fertilizers - Dec 5, 2012.

Chemicals and Fertilizers

Uralkali May Cut Production by 50%

Uralkali could cut production by 50% to 2mn tonnes from Dec 2013 to Mar 2013, Reuters reported on Tuesday (4 Dec), citing the company's CEO Vladislav Baumgertner. This would be done in response to weak potash demand and to accelerate the destocking process, he said. On our estimates, Uralkali's capacity utilisation rate will reach only 45% in 1Q13 vs 70% in 1Q12. Baumgertner added that Uralkali's trading arm BPC may sign an agreement to supply potash to India in December, and a contract with China in March. Additionally, the company expects global demand to rise to 54mn tonnes in 2013, up from 48-49mn tonnes this year.

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Bottom line

We view the news as moderately negative for Uralkali. However, given recent bearish comments from PotashCorp and discouraging industry reports, we believe it should come as no surprise. We note that in 10M12, Uralkal i produc ed 8mn tonnes of potash with its capacity utilisation rate averaging 80%. The company previously guided for 9.3mn tonnes of potash production in 2012, so its full-year utilisation rate will likely decline to around 70%.

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Publication:Russian Banks and Brokers Reports
Date:Dec 6, 2012
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