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How much will Belaruskali lose after Yara withdraws?
Yara's purchases are much larger than its exports to Norway / Euroradio
When Yara stops working with Belarus, it will not be a disaster for Belaruskali. However, the company will have to find buyers for more than a tenth of its production.
The Norwegian company Yara has promised to stop buying potash fertilizers in Belarus by 1 April 2022. Euroradio has calculated how significant this cooperation is for the Belarusian side and found out how Belaruskali can try to reduce losses.
More than a tenth of Belaruskali's earnings affected
According to Belstat, potassium chloride worth $74.2 million was exported to Norway in 2020. This country has become the seventh largest buyer of Belarusian potash. Still, the percentage share of Norway is small -- only 3% in value terms and3.1% in physical terms.
Yara is much bigger than the Norwegian market. According to Alyaksandr Yarashuk, chairman of the Belarusian Congress of Democratic Trade Unions, Belarus sold more than 11 million tons of potash last year. Yara bought about 1.3 million tons out of this amount, which is 11-12%. Then the Belarusian potash was sent to various countries of the world.
Since the data on how much Belarus earned from the sale of potash fertilizers in 2021 is closed, and the terms of the contracts are unknown, the calculations of the affected revenue from Yara's withdrawal can only be calculated approximately. If we consider the data of 2020, the 11-12% purchased by Yara is from $265 million to $289 million for the year.
According to experts, this is a significant amount for Belaruskali, but not critical. Belaruskali may be able to redirect exports to other countries.
"It will be painful, but not fatal. One should look at the Asian markets. It is very likely that there will be a way out of this situation. We will have to keep track of the contracts that have been signed since March because it's the dead season. There are standard contracts signed in February. March and April will show where and with whom Belaruskali will be backing itself up," said political analyst Ihar Tyshkevich.
"Yara operates around the world. It is a serious partner for Belaruskali. But, by my assessment, Yara's withdrawal from Belarus will not cause a collapse at Belaruskali," says Yarashuk.
Russia will help, while Yara may trade through its subsidiaries.
According to Ihar Tyshkevich, Belarus can send the extra volumes of raw materials not only to the biggest buyers like Brazil, India or China. There is also an option to sell the potassium to the Russian competitor, Uralchem. The fertilizer may even be supplied to Yara as if it were Russian.
"Russia may buy Belarusian fertilizers, but not at world prices, but at domestic prices. That is, the price is no more than $70-90 per ton".
This is much less than the price under the last contract, which was unveiled by the Belarusian Potash Company. Supplies to the Indian market were planned at $280 a ton.
"As for the opportunities of Belaruskali, there are some. Russia will undoubtedly help to avoid the consequences of sanctions," said Yarashuk.
Besides, it's not certain that the relationship with Yara will be terminated at all.
"Yara started restructuring its business around 2013. It very rarely creates branches tied to the central office. More often, it absorbs or buys out companies that sell fertilizers. This is how Yara has become a holding company that includes several independent legal entities. For example, in Colombia it is a separate company that sells fertilizers under its own name. It is the same in Brazil," says Ihar Tyshkevich.
It is possible that these legal entities will continue to trade with Belarus.
Why is Yara leaving now?
Yara did not hurry to leave Belarus, saying it would do more to protect the employees of Belaruskali. More pragmatic reasons can be seen here.
"Belaruskali is one of the largest suppliers of potash fertilizers in the world. To give up its raw materials, we need to find a replacement. Ihar Tyshkevich notes that contracts in the potash market are usually concluded at certain times: from December to February and from May to August. Last year, the Belarusian Potash Company announced the signing of new contracts in January.
"Yara could cancel the contract at any time. But where would you get the raw materials? Most of the raw materials are sold under long-term contracts. There's less of them on the stock exchange. The question with Yara is not only how to physically take the raw materials, but at what price. The Norwegians buy at a substantial discount".
It was convenient for Yara to keep cooperating until the new contracts were signed because of the price. After all, Belaruskali is constantly accused of dumping.
"Yara's withdrawal from Belaruskali will benefit Uralchem. Both companies can sell at a discount and neither has its own fleet, which means that Yara can make its services look like something very important. It was logical for Yara to prepare for the break with Belaruskali by dealing with Uralchem," thinks Ihar Tyshkevich.
Food security or business on the blood?
Alyaksandr Yarashuk notes that the situation may change because of the political decisions made by the countries that imposed sanctions against Belaruskali. "The demand and the price of fertilizers are generally increasing. This means that food also becomes more expensive. If some of the Belarusian raw materials leave the market, these processes will accelerate".
"It is clear that neither Europe nor the USA will starve. But there is no doubt that third-world countries may face serious challenges. We do not know what decisions will be taken in this regard".
Belaruskali may face serious problems if Europe stops buying its potash fertilizers.