OREANDA-NEWS. March 16, 2010. BPC, the exporting trader of Uralkali and Belaruskali, signed a contract with Indian potash importers for April 2010 - March 2011 at USD 370/t cfr. The delivery volume is 900kt. The previous contract, which expires this month, had a price of USD 460/t cfr., reported the press-centre of OTKRITIE Financial Corporation.

View: The new contract price is roughly USD 60/t less than those recently settled on spot markets. After a small rebound in prices, and a significant rebound in volumes, the market anticipated a price closer to spot levels. However, the Canpotex agreement for 2Q10 deliveries, coupled with the firm position of Indian importers in negotiations, undermined the ability of other producers to obtain a large price increase versus the Chinese contract.

We view this event as slightly negative for potash producers since we see either weak growth in potash pricing in 2010, or perhaps no growth at all. Consumers from other countries will be looking at the USD 350 - USD 370/t cfr price range of Indian and Chinese contracts, while the producers’ capacity utilization is still at just 80%. In our model for Uralkali and Silvinit, we assume a USD 350/t price for China and India for FY10 and a price of USD 400 - USD 410/t for spot markets. Thus, there is less than a 5% upside risk for revenue and 10% upside for EBITDA in our valuation.

Both Russian producers trade on a 2010E EV/EBITDA of 10x - 11x, which is in line with peers. We see no for a substantial near-term catalyst for share price growth for either company.