OREANDA-NEWS. February 27, 2010. According to Oleg Petrov, sales director of the exporting trader BPC, a new potash contract should be settled within a few weeks. The 2009 contract, according to which potash deliveries are made at USD460/t cfr, expires in March of this year, reported the press-centre of OTKRITIE Financial Corporation.

View: Spot prices are currently at USD 420/t cfr, while Indian importers have announced that they will be struggling to get the price into the USD 350/t - USD 370/t range, and have already concluded a contract for 2Q10 deliveries with Canpotex at this level. That said, we see the potential for long, drawn-out negotiations. At the same time, India remains a very important buyer with a share of over 15% of the sales mix of Russian potash companies.

At present, the situation is asfollows: - either India will setttle potash contracts for just USD 350/t cfr (which is lower than the market is pricing in) or - capacity utilization in 2010 will be lower than the expected figure of 80%. Neither case is favorable for the stock performance of Uralkali or Silvinit.

Valuation and Action: Our target prices for these stocks are already below current market quotations. Both companies trade on a 2010E EV/EBITDA above 10x, and are more expensive than peers.