Uralkali settles US antitrust suit with pocket money, passes buck to Potash Corp et al

Reuters reports Russian potash giant Uralkali (LSE:URKA) has settled US antitrust claims after agreeing to pay direct and indirect plaintiffs $10 million and $2.75 million respectively.

The class-action – thrown out in September last year only to be revived by the US Court of Appeals in June – dates back to 2008 and accuses seven companies of engaging in a global conspiracy to raise the price of potash since 2003.

Uralkali’s move will put some pressure on the other defendants which include Agrium (NYSE:AGU), Potash Corp. of Saskatchewan (TSX:POT), Mosaic Co. (NYSE:MOS), Silvinit (now merged with Uralkali), Belarusian Potash and International Potash.

Together the groups alleged to operate as a ‘cartel’ produce some 70% of the world’s potash – a key ingredient in fertilizers. Global demand is between 50–60 million tonnes per year.

Chinese and Indian consumption drove the potash price from $100/tonne in 2004 to almost $900/tonne in the run up to the 2008 recession when the boom went bust and prices rapidly fell back to $350/tonne.

After trading in the $500–$540 a tonne range for most of last year, the price of soil nutrient has steadily declined this year to its current levels of $460–$470 a tonne.

While miners like BHP Billiton and Vale put potash projects on ice and producers such as Potashcorp idle mines, Uralkali has been expanding production and reaping windfall profits thanks to the fattest margins in the industry.

Earnings at the $24 billion company is set to jump 30% to $2.69 billion this year. Uralkali stock – partially listed in London – is up 19% so far this year.

Uralkali has spent 900 million on a share buyback program and is set to pay out an additional $1.5 billion cash to shareholders this year.

6 Month Potash Prices - Potash Price Chart

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