Lukashenka Regime Takes Desperate Move On Global Potash Market

This threatens Belarus with another “trap”.

Belarusian potash exports to China have fallen sharply in price over the past five months. But they seem to have grown in volume. It seems that in order to stay on the key market for themselves, the Belarusian authorities are desperately dumping, because external circumstances are not conducive to Belarusian potash exports, writes the publication “Belarusians and the Market”.

Belarus exported potash fertilizers to China for $393 million in January-May. In monetary terms, exports have fallen by 50% over the past five months compared to last year. This is not surprising, given that in January last year, the average world price per ton of fertilizer was more than $500, and by January this year it had collapsed to $300.

Although, in fact, in May, deliveries were almost twice as high as in April and brought in more than $100 million. But this happened not because prices rose, but because export volumes in tons increased. In May, the Ministry of Economy admitted that Belaruskali had increased its fertilizer output.

But the sales price was hardly encouraging. With the average world price of potash at $307 per ton, the average cost for China this year was about $240. As the world's largest importer of potash fertilizers, China always buys them at a substantial discount.

But Belarus sold its fertilizers even cheaper. Even last year, the average price of one ton of Belarusian potash exported to China was less than $200. And compared to May last year, the average world price of one ton of potash has fallen by almost $70.

And it will probably get worse. The international agency Fitch Ratings predicts an average price for potash fertilizers of $300 per ton this year, with a gradual decline trend towards the end of the year. The agency expects that next year the price of a ton of potash may fall to $230.

But Belarus has no choice. Because Belarusian fertilizers are being squeezed out by competitors on the Chinese market. Over five months, the cost of Russian fertilizer deliveries to China has grown by 22%, and Canadian ones by 13%. Therefore, in order to stay on the Chinese market, it is necessary to resort to the most desperate dumping.

Because the Chinese market is, one might say, almost all of the little that is left for Belarusian potash. At least last year, out of 9.5-10 million tons of potash exported to China, probably about 7 million. Belarus sent 1.5 million tons by rail, and the rest by sea through Russian ports.

Complex and expensive logistics are another challenge for Belarusian potash exports. This week it became known that the Russian company Baltic Ship Mechanical Plant stopped transshipping Belarusian potash fertilizers. Last year, this company transshipped 2 million tons of Belarusian potash.

The reason for the stoppage was that Minsk did not agree to the price set for it. The company promises that deliveries will resume in the "foreseeable future." Although the future does not seem so foreseeable. To keep the terminal from standing idle, the company launched coal transshipment. According to BSMZ estimates, the company's expenses on re-equipping the terminal for coal could amount to about 100 million rubles. So, apparently, the company is not so sure about the resumption of transshipment of Belarusian potash.

In any case, Belarus will have to either agree to the new price or look for a new logistics solution. And this is not so easy to do, given that BSMZ accounted for about 20% of all Belarusian potash exports last year. Unless, of course, the Belarusian authorities find non-economic levers of pressure on the Russian company.

Complex logistics and falling world prices undermine the relative well-being that Belarusian potash exports still have had. Because endless dumping with rising transportation prices could call into question the feasibility of exporting potash in general.