“RED GOLD” COMPETITIVE ADVANTAGES
About five decades ago when in the surroundings of the modern Soligorsk, Minsk region, scientists discovered vast deposits of potassium ore, the real meaning of the event for the republic’s economy was hard to comprehend. Today Belaruskaly Production Association is the world’s second largest manufacturer of potash fertilizers, its largest exporter and simply a super profitable enterprise
“We have proved that Belarusians are not only good at mining and producing mineral fertilizers, but they also know how to sell it on the world market,” says Andrey Bashura, Director General of the Association. But as you know, sooner or later deposits run out and the period of time we could take advantage of natural resources depends mainly on a reasonable approach to their exploitation. At present Belaruskaly is actively investing its money into construction of new mining facilities. Krasnoslobodsky site is to be opened next May. And three years later, in 2012, it is planned to start developing Berezovsky mining site. Their outturn is not less than 6 million tons of ore a year per each of the sites and the prospects of mining as defined by the association’s management are “long-ranged”. By 2015 Belaruskaly expects to increase their yearly output of mineral fertilizers up to 9.56 million tons. Let’s take this year’s data for comparison: it is planned to produce 8.3 million tons and 7.1 million tons of the said amount are to be sold to foreign customers.
Today deficiency of potassium fertilizers on the world market is estimated at about 1.5–2 million tons. And consumers are far from being happy about it though producers can’t but admire the favourable price environment. Thus, if last year the cost of potash fertilizers supplied by Belaruskaly PA was hardly 200 dollars per ton, now the enterprise concludes contacts where the price specified amounts to a thousand dollars per ton. To sell the mineral product at a maximum price is the main task of Belarusian Potash Company and it has obviously succeeded in it. And the problem of using the surplus profits has already been solved by Belaruskaly. As Andrey Bashura estimates it, there exists no other Belarusian enterprise which invests such amounts into the development of its production as the Soligorsk association does. “Vast financial funds are being used to keep up with technological progress and to support our production and the investment amounts are expected to be further increasing”. About 400 million dollars a year — that was the reference figure of capital investments defined by the Director General.
It has become a common situation that super profits for highly remunerative enterprises also mean super costs. As you know, Belaruskaly is the major sponsor of the national development fund which uses its financial assets to implement important social and economic state projects. In fact, all Soligorsk citizens are paid out a peculiar kind of “dividends” by Belaruskaly. The Production Association repairs and builds roads, maintains some socially important objects, kindergartens and hostels in particular, at its own costs. Of course, the Association contributed much to the construction of the Ice Palace in the mining city which is to be opened soon.
There are only 6 countries importing potash fertilizers onto the world market: besides Belarus, these include Canada, Russia, Germany, Israel, Jordan. Potassium deposits were found in 30 states but most of them are not able to satisfy even their own needs. Last year consumption of potash fertilizers on the world market has increased by 13 per cent, however, experts do not advise to consider this fact as a commencement of a stable tendency. It is not excluded that after 2010 offer will exceed demand, especially taking into consideration the fact that the fertilizers are mostly consumed by a limited number of countries and it is quite probable that they will try to lower the prices. Thus, the memories of China trying to drag out negotiations with suppliers in 2006 are still fresh and then it resulted in a considerable decline in sales. And this was perhaps the crucial factor to provide for a significant increase in consumption in 2007 (China’s share in the total amount of sales constituted a fifth of the world’s demand). Future situation will be much dependent on the coordination of policies pursued by the largest suppliers of potash fertilizers, including their willingness to control their outputs in order to retain prices at the highest level. As a matter of fact, as experts suppose in the next year or two we could expect demand to prevail over offer though yet there are no signs of an increased price growth dynamics. Growth of prices for agricultural products causing an increase in purchasing power of these producers can be regarded as a positive but a rather insignificant factor.
Belarusian producers have one essential competitive advantage: we produce products of the highest quality possible. As Andrey Bashura claims, potassium deposits will be enough to provide at least 3 more centuries of work. For now the favorable business environment on the world market ensure Belaruskaly its super profits but it is still quite risky to try to forecast even for the next 2–3 years. However, it must be noted that whatever fluctuations the world’s price environment might experience today’s investments in Belaruskaly are sure to pay off.