OREANDA-NEWS. February 02, 2011. Belarusian OJSC Belaruskali needs to occupy a strategic position on the global market before the market is redistributed in favor of the Russian makers, financial and stock market analyst Viktor Kovalenko said in an interview.

“After a group of investors close to the Russian administration acquire shareholdings in Uralkali and Silvinit, the world market will be redistributed, and the merger of the two Russian producers will weaken the strategic position of Belarus on the potash fertilizers market irrespective of which company exports potash – Belarusian Potash Company (BPC) or International Potash Company (IPC),” Kovalenko said.

“The group that controls Uralkali and Silvinit will naturally aim at increasing its influence and share on the world potash market, and their next major step would be to seek control in Belaruskali,” he said.

According to the expert, there are a few possible scenarios, including the sale of a controlling or blocking shareholding in Belaruskali. “Analysts evaluate Belaruskali between USD 14 billion and USD 15 billion, however, the Russian offer to buy 50% in the potash maker for USD 7.5 billion would not be adequate to the profit the united Russian company would gain as a result of the deal,” Kovalenko said.

Another possible scenario involves a reduction in the share of Belarus in Belarusian Potash Company. “Uralkali now controls 50% in the exporter, however, analyses show that Belaruskali accounts for at least twice as much export of potash, and Belaruskali’s overall capacity of 8 million tonnes annually is higher than that of Uralkali, at 5.5 million tonnes a year. Nevertheless, Uralkali has control in the board of directors and the supervisory board of Belarusian Potash Company and receives dividends,” Kovalenko said.

As soon as Uralkali completes its merger with Silvinit, the Russian side will likely propose a revision of the structure of shareholdings in Belarusian Potash Company.

“Since Silvinit’s capacity is close to that of Uralkali, the united Russian company would logically like to control at least two-thirds in BPC. Belarus would have to either turn own that proposal or accept it, unless it has some powerful counterarguments. If Belarus agrees to cut its stake in BPC, its influence on the global trade in potash will be reduced,” the expert said.

Otherwise, Uralkali may turn to the other major trader – International Potash Company. “If Belarus should fail to accept the proposal of the Russian majors, Uralkali may take away BPC’s right to export its potash fertilizers and change to IPC, which now sells all products of Silvinit,” the expert said.

Belarus will thus have two options: either to sell all its products via BPC, in which Belarus controls 50%, and share dividends with the Russian partner, or try and change the situation otherwise. According to Kovalenko, Belarus will either seek control in BPC or create a new trader.

It seems that one way out would be to sell a major stake in Belaruskali to a third party, however, any potential buyer should share the interests of the Belarusian side. If Chinese or Indian investors buy a stake in Belaruskali, they will hardly pursue the same policy as the Belarusian authorities, because the main consumers of potash would be interested in keeping the global potash price as low as possible,” Kovalenko said.

The best-case scenario for Belarus would be to consolidate its global position by investing in new production facilities, increasing the volume of explored reserves and creating a vertically integrated company to produce and sell all types of mineral fertilizers,” Kovalenko said.

He recommends Belarusian producers to acquire titles to prospecting and development of new phosphate and potash deposits not only in Belarus, but also in the countries close to final consumers – in Kazakhstan, Uzbekistan and Tajikistan. It is also important to engage foreign investors via the world capital market and establish partnership relations and build up alliances with global players.