Intrigue continues in the dispute between Russian and Belarusian potash companies, as Belarusian secret police allegedly tried to abduct a former Russian fertilizer executive.
The Russian state news agency, RIA Novosti, recently cited media reports that four officers of the Belarusian KGB “accosted” a former executive of Russian potash producer Uralkali as he tried to board a train in Moscow.
The former executive, Dmitry Samoilov, was freed after shouting for help to Russian police officers, according to the report. The Belarusian KGB has denied the allegations, saying the “absurity of those stories is obvious even to a layman.”
In August, Belarusian authorities arrested the CEO of Uralkali, Vladislav Baumgertner, when he traveled to Belarus. Baumgertner’s arrest on charges of abuse of power came roughly a month after a Russian-Belarusian potash cartel disintegrated.
Uralkali had withdrawn from the joint marketing scheme with Belaruskali, its state-owned Belarusian counterpart, claiming that its former partner had been circumventing the cartel by making outside deals with potash buyers.
The Belarusian government has since decided to prosecute Baumgertner for alleged embezzlement, while Russian authorities are pressing for his extradition to Russia, according to RIA Novosti.
Prior to his arrest, Baumgertner said the dissolution of the cartel — which was meant to control production and prices — would cause wholesale potash prices to drop from $400 per ton to $300 per ton.
Potash prices on the global wholesale market have since fallen by about half that amount, to $350 per ton, said David Asbridge, president of the NPK Fertilizer Advisory Service.
When the cartel disintegrated, Uralkali adopted a strategy of “product over price,” meaning it would increase production despite the negative impact on price, he said.
“So far, they’re proving it,” Asbridge said. “They’re pushing out a lot more than they have historically.”
The company’s potash output during the second half of 2013 was about 30 to 35 percent higher than in the first half of the year, he said.
The change in Uralkali’s strategy has roiled the global potash market and hurt the Potash Corp. of Saskatchewan, a major North American producer.
The company’s recent profits have been lower than it previously projected, which it blamed in part on the debacle between Russian and Belarusian producers.
“This created tremendous market uncertainty and a state of paralysis in most regions,” said Bill Doyle, Potash Corp.’s CEO, during a conference call with analysts. “As a result, our potash shipments to domestic and offshore markets declined.”
China and India, for example, have deferred their potash purchases as they adopt a “wait-and-see approach” in anticipation of further price drops, he said.
Doyle said Uralkali’s strategy will end up hurting the company’s own finances, characterizing it as an “amateur approach” and “probably the single dumbest thing that I’ve ever seen” in the fertilizer industry.
However, the turbulence seen in the potash market is largely a reflection of the tremendous increase in production capacity over the past five years, said Asbridge.
Nitrogen and phosphate fertilizers — the other major plant nutrients — have also experienced recent price drops after previous surges, he said.
“High prices are typically a cure for high prices,” Asbridge said.