Potash casualties pile up as price heads below $300

Russia's OAO Uralkali has blasted the global potash market wide open sending stock prices in the sector off a cliff.

Uralkali is the world's largest potash producer and on Tuesday announced  it's ending the decades-old distribution arrangement with Belarus, which controls roughly 43% of global exports, to go it alone.

CEO Vladislav Baumgertner sees the price falling below $300 a tonne before the end of the year from a Vancouver FOB price for the soil nutrient of around $400 a tonne at the moment.

A sub $300 a tonne price is a world away from five years ago when rising Chinese and Indian consumption drove the potash price from $100 a tonne in 2004 to almost $900 in the run up to the 2008 recession.

Uralkali, which also announced it's upping output, was the one producer which could pull this off. Its production cost is a paltry $62 a tonne, compared to at least $100 in North America and $240 in Europe.

Analysts, quoted by FT.com, said Uralkali's bombshell has turned the potash market upside down:

This is as if Saudi Arabia left Opec – for the potash sector this is huge,” said Jeremy Redenius, an analyst at Bernstein. Joel Jackson, at BMO Capital Markets in Toronto, said the breakdown of the BPC cartel marked “the end of the potash world as we know it.”

The reaction on markets were swift and brutal.

Uralkali (MCX:URKA) fell as much as 25%, Potash Corp. of Saskatchewan (TSE:POT) gave up more than 20%, while the Canadian company's North American partners Agrium (TSE:AGU) and Mosaic (NYSE:MOS) dropped 4.5% and 19% respectively.

Germany's K+S (OTCMKTS:KPLUY) was trading down 23%, Israel Chemicals (TLV:ICL) declined 18%, Sirius Minerals (LON:SXX) hoping to build a potash mine in Yorkshire gave up 15%, while Intrepid Potash (NYSE:IPI) in the US was one of the biggest losers, plummeting 29%.

Saskatchewan's junior players hoping to build mines in the Canadian province including Karnalyte Resources (TSE:KRN), down 46% and Vancouver's Encanto Potash (TSE:EPO), losing 44% were some of the hardest hit.  Western Potash (TSE:WPX) came off relatively lightly with a 9.5% slide.

Allana Potash  (TSE:AAA) which is advancing a project in Ethiopia and Verde Potash (TSE:NPK) active in Brazil, also lost more than a fifth in value.

Brazilian giant Vale's (NYSE:VALE) recent decision to walk away from an expensive potash project in Argentina is looking prescient while world number one miner BHP BIlliton's (LON:BHP) Jansen project in Saskatchewan now looks unlikely to get the go-ahead.

SEE ALSO: Why the break-up of the potash cartel is not such a big deal

FLASHBACK: Uralkali settles antitrust with change, passes buck to Potash Corp et al