RBC Daily: "Struggling potassium producers"
Economic Development Ministry proposes to bring back export duties on potassium.
The Economic Development Ministry will ask the government to bring back export duties on potassium fertiliser, setting them at 5%. The idea was first aired in early March, but at that time the proposed rate was 15%. Experts argue that the duty will not substantially increase budget revenue, but will make potassium producers more amenable in talks with the producers of compound mineral fertiliser.
The Economic Development Ministry had prepared a proposal to the government that would set the potassium fertiliser export duties at 5%, a government source said yesterday.
He denied earlier unofficial reports that the duty could be as high as 15%.
The 5% export duty on potassium chloride was in place from April 2008 until the end of April 2009. However, the government again raised the issue of bringing back duties in response to complaints from producers of compound mineral fertiliser (who use potassium chloride as raw material.)
Potassium market participants think the introduction of export duties makes no sense, because there is no shortage of potassium chloride in the Russian market and additional costs will make the industry less attractive for investment and jeopardise investment projects.
Prime Minister Vladimir Putin recently urged First Deputy Prime Minister Viktor Zubkov and the agencies concerned to monitor fertiliser prices more thoroughly. The prime minister complained that although the overall level of prices had dropped by 15%, some regions have raised prices for certain types of fertiliser (ammonia nitrate, potassium chloride and urea.)
True, sources close to potassium companies claim that government officials have not recently discussed the issue of duties with producers. Nor was the introduction of duties discussed at several recent meetings devoted to agriculture, at the Agriculture Ministry, the Federal Antimonopoly Service and at Viktor Zubkov's office. Silvinit asked the government in early March to develop regulations to ensure non-discriminatory access of potassium chloride to the Russian market.
So far the issue of duties is under discussion and the producers of compound fertilisers are trying to wrest concessions from potassium producers on their own.
In particular, Voskresenskiye Minudobreniya (part of Uralkhim) is challenging Silvinit's export contracts in the court of law and Akron has secured, through an Arbitration Court, a three-year contract with Silvinit. The mineral fertiliser plant which is part of the Kirovo-Chepetsky chemical facility, has sued Silvinit, seeking a contract to supply potassium chloride. In the opinion of compound fertiliser producers, the potassium producers are creating an artificial shortage of raw materials in the domestic market, preferring to export potassium chloride.
Potassium producers, for their part, are trying to butter up the authorities. For example, Uralkali last week announced that it would cut the prices for potassium chloride for Russian farmers down to 4,250 roubles per metric ton for the period of the spring planting season (until July 1,) which is 7% less than the price set under the agreement between the Russian Association of Fertiliser Producers and the Agro-Industrial Union of Russia. Early this week Silvinit followed suit by cutting the price by 6% to 4,280 roubles per ton. The minimum export price of potassium chloride is $350 per ton.
Renaissance Capital's analyst Marina Alexeyenkova notes that the introduction of a 5% export duty on potassium could earn the budget an extra 2.5-3 billion roubles in 2010. "At the same time, after reports on duties were published, the producers of compound mineral fertiliser have more chance to get potassium producers to cut prices," she says. Stock exchange speculators could make a hefty profit on reports of possible introduction of duties. Uralkali's share prices sagged 5% within a single day and only rebounded after Igor Sechin's statement. The company's shares dropped by 3.5% yesterday.
Daniil Shabashov
