Strike in Belarus by Potash Miners Pressures President, Clouds Commodity Market
By Alistair MacDonald
Workers at the world's largest miner of potash are joining
widespread protests against Belarus President Alexander Lukashenko,
intensifying pressure on the embattled leader and threatening to
disturb the market for a key fertilizer.
JSC Belaruskali controls up to 20% of the global supply in
potash, meaning any extended strike action or disruption at the
company could impact prices of a commodity widely used by farmers
to help plants grow. The state-owned mining company is also a
pillar of Belarus's economy and a major source of taxes and foreign
currency, making it important for Mr. Lukashenko.
On Monday, a person familiar with the matter, as well as local
and Russian state-owned media, said that some miners at Belaruskali
had joined the protests and strikes that have erupted after the
country's Aug. 9 election, whose results are disputed after Mr.
Lukashenko claimed 80% of the vote.
"That might be the killer blow for Lukashenko," said Tim Ash,
emerging-market strategist at BlueBay Asset Management, referring
to the economic significance of Belaruskali.
It isn't yet clear whether the company's potash production has
been affected so far. Representatives of Belaruskali couldn't
immediately be contacted for comment.
On Friday, the company that markets Belaruskali's potash issued
a statement on behalf of the miners, calling for an immediate end
to violence committed against protesters.
"We can't remain indifferent to what is happening now," the
statement from Belarussian Potash Co. said. "Violence is never
Scotiabank estimates that a two-week strike at Belaruskali would
reduce quarterly global potash production by 3.5%.
Because potash is mostly sold in long-term contracts, rather
than in a spot market like most other commodities, it is difficult
to see an immediate impact on its price.
However, the share prices of large potash producers have
increased since the disputed election in Belarus, with Canada-based
Nutrien Ltd up around 7% and Israel's ICL Ltd. up about 5%.
Changes in the price of potash could have a big impact on
farmers. For instance, a 25% drop in potash prices can save the
average U.S. corn farmer about $10 an acre in production costs,
which would cut total costs by 3% from around $330 an acre for many
producers, St. Louis-based NPK Fertilizer Advisory Service has
Fertilizers make up an even bigger percentage of farmers' costs
in developing markets.
Still, price fallout from the situation in Belarus could be
limited by the fact that the potash market has been oversupplied
for years, analysts said.
For a decade through 2009, the price of potash increased by
around five times on the expectation that demand would soar as
populations grew and diets improved in emerging markets like China
and India. But that demand boost failed to materialize, while mine
capacity grew to meet the expected rise. Potash currently trades at
between $220 and $275 a metric ton, depending on the sales
contract, around a quarter of its peak of $860 in early 2009.
The market is dominated by a few big players, including
Belaruskali, Nutrien and Russia's Uralkali JSC.
Belaruskali, which runs six mines, produced 1.14 million metric
tons of potash in July, a record for monthly output.
The company's massive Soligorsk mine operates at 2,000 feet
below ground, where workers drill at the seams of pinkish rock.
Potash is a compound of potassium, which, along with nitrogen and
phosphorous, is essential for plant life. It strengthens plants and
makes them more resistant to disease.
--Georgi Kantchev and Anna Isaac contributed to this
Write to Alistair MacDonald at email@example.com
(END) Dow Jones Newswires
August 17, 2020 12:55 ET (16:55 GMT)
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