UPDATE 1-Uralkali to cut potash output by half in Dec-March

Tue Dec 4, 2012 4:19pm IST

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Stocks

   

* Potash producer to cut output by 2 million tonnes Dec-Mar

* Uralkali says India, China halted contract purchases in H2

* Low demand to persist in the Q1, prices seen stable

* Global demand to rise next year to 54 million tonnes

By Natalia Shurmina and Polina Devitt

MOSCOW, Dec 4 (Reuters) - Russia's Uralkali will cut potash output by half to 2 million tonnes in the December to March period to reduce excess global supply during a protracted fall in demand, its chief executive said in an interview.

China and India halted contract purchases of the crop nutrient in the second half of the year and are expected to contract lower volumes next year, making for a slow start to 2013.

China is seen as being well supplied, while a reduction in Indian subsidies and a weaker rupee have made potash more expensive the nation's farmers.

"Starting from December and during the first quarter we will work with 50 percent of capacity, because demand will be rather weak," CEO Vladislav Baumgertner told Reuters. "We also expect that this will help decrease stocks."

Uralkali, the world's largest potash miner by output and the second-biggest potash producer by capacity behind Canada's Potash Corp of Saskatchewan Inc, expects to sell about 1.6 million tonnes of potash in the first quarter of 2013.

Full-year 2012 sales are seen at 9.3 million tonnes, said Baumgertner. He did not provide production guidance, saying only the company's annual capacity will be at 13 million tonnes by the end of this year.

The BPC trading company, a joint venture of Uralkali and Belaruskali, may sign contracts with India in December and China in March, while prices should remain stable, Baumgertner added.

Uralkali expects global demand for potash to rise to 54 million tonnes in 2013 from 48-49 million tonnes in 2012, he said.

"Stocks will be consumed by the market during the first quarter, and producers will be able to sign contracts with China in March," Baumgertner said.

"Stocks in India are not too high and stay on usual levels - of about 1 million tonnes. The Indian contract can be signed already in December," he added.

Prices for China and India in the new contracts should remain stable, the CEO said. The BPC trading company, which Uralkali operates together with Belaruskali, will look to maintain prices close to current levels - $470 per tonne and $490 per tonne respectively, he added.

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