Potash fertilizers: contract signed, but its price is lower than anticipated
On January 15, potash supply contract with China was signed at USD 400/ton.
Belarusian Potash Company had to agree to a lower price for potash supplies after a contract between the Canadian trader Potash Corp. and Chinese buyers had been signed. Reduced price could be compensated by increased supply volume, which would contribute to the restoration of Belaruskali’s production volumes.
2012 BPC performance results demonstrate that projected goals have not been implemented and BPC has not managed to sell potash fertilizers worth USD 3 billion. In 2012 only a six-month contract was signed with China at USD 470/ton for supply of 400 thousand tons and optional 100 ton deliveries. Reduced demand from India and China resulted in lower capacity utilization by potash producers by 20%-30%.
To avoid price reduction for potash fertilizers Uralkali and Belaruskali were to reduce capacity utilization to 50% in early 2013. The agreement by a Canadian trader to supply 1 million tons at USD 400/ton resulted in the new price level on the mainstream market, China, which is USD 70/ton lower than the previous contracts. In the given circumstances, the BPC’s consent to new price for Chinese consumers has been a matter of time.
The new contract envisages supply of 700 thousand tons, plus an optional purchase of 300 thousand tons, which is double the volume of previous contract. Despite the decline in price and the need to adjust prices for other consumers, this contract will ensure similar level of foreign currency proceeds due to increased production volumes. However, this is a definite success for customers who managed to achieve reduced contract price.
Thus, the signed contract will increase the capacity load. To maintain the current level of foreign currency proceeds, the BPC has to increase the potash supply by 17.5%. If the project is successful, in 2013 foreign currency proceeds could exceed 2012 figures.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.