3 August 2015, Monday, 7:40

Minsk is losing ‘potassium war’

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Belarus has stopped selling fertilizers abroad.

According to Argus agency, Belarus only exported 44 thousand tons of potassium in August. The spot prices (FOB CIS) were $330-370, which means that in terms of money the exports only brought not more than $16.3 million. From the start of September, sources in the potassium market claim, there were no shipments at all. For comparison, in the first half year of 2013 Belarus exported 3.3 million tons of potassium chloride for the total amount of almost$1.27 billion. This amounts to the average of 550 thousand tons a month, which is over $200 million in the current prices. This means that in August the country received around 188 million less in August and another $102 million – in the first half of September, around $290 million in total, a Russian newspaper the Izvestiya reports.

Belaruskali still has only two out of four mines working, the workers are being paid two thirds their salaries.

At the same time potassium exports is one of the most significant item of Belarus’ foreign currency earnings: in 2012 Belarus exported 6 million tons of potassium chloride for the total amount of over $2.66 billion (only oil products and the so-called “solvents and thinners” gain more for the country).

Although the decrease in potassium sales is not Belarus’ only export problem (for example, Russia reduced the imports of Belarusian machine-building industry products), it cannot but affect the country’s financial stability indicators.

According to Belarus National Bank’s preliminary calculations, the foreign reserve has decreased by $214.9 million in August and amounted to $7.7 billion as for September 1 (by the International Monetary Fund’s standards). While the assets in foreign currency have grown by $406.7, it first of all took place due to the return of the equities that Belarus had by a repurchase agreement (the amount of the RP assets has decreased by over 2 times down to $537.2 million).

The Moody’s rating agency warned investor as far back as in early August that the breakdown of the BPC (Belarusian Potassium Company – joint Belarus and Russia’s trader) might negatively influence Belarus’ economy (current Belarus’ rating according to Moody’s is B3 with a negative forecast). Although, the agency came from the assumption that Belaruskali would work at 100% load with world potassium prices falling (the BPC was the largest exports cartel controlling over 40% of world’s sales in potassium fertilizers and its breakdown meant price wars). According to the calculations by Moody’s, the decrease in price down to $350 per ton (BPC’s latest contract with China was concluded at $400) will decreased Belarus’ exports earnings by $400 million a year, while if the price falls down to $300 – Belarus will lose $1 billion.

“Such slackening in exports will worsen the country’s trade balance and will require the additional use of reserves or increased external financing”, - Moody’s analysts consider.

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