Deutsche Welle: Potash blow at Belarus's budget

The decrease in export prices of potassium chloride will have painful consequences for the Belarusian economy.

Belarus expected to gain 0.5 billion dollars more from the potassium chloride export in 2012, Deutsche Welle reminds.

The reason was the reduction in the volume of supply to foreign countries. Taking into account the possible drop in potash prices from 470 to 400 dollars per tonne, the situation may be even less pleasant this year, experts suppose.

Important budget item

Economist Leu Marholin calls the export of potassium chloride the most significant sourse of income for Belarus. According to the data of the Ministry of Taxation, Belaruskali company is the country's second largest taxpayer after Beltransgaz company. Production of potassium chloride requires minimum foreign currency, because only domestic raw materials are used. The rest activities that bring foreign currency to the country, including export of other kinds of mineral fertilizers, oil products and mechanical engineering, are based on imported raw materials and thus require foreign currency.

“The fall in prices of potassium chloride is very painful for Belarus, because the country's foreign currency earnings may reduce by tens or even hundreds of millions dollars,” Leu Marholin thinks. If the trend goes on, it will be a strong blow at the balance of payments, the economist is confident. It is especially dangerous in 2013, when Belarus has to pay off over 3 billion dollars in external debts.

Negative trend

As reported by the Belarusian media, the Belarusian Potash Company (BPC), which has a monopoly on exporting potassium chloride, signed a contract with Sinochem and CNAMPGC, China's largest importers of minerals fertilizers, for 6 months. Under the contract, one tonne of potash will cost $400. The BPC is to ship 700,000 tonnes of potassium chloride and 300,000 tonnes of optional quantities in Q1 2013.

According to observer Tatyana Manenok, Belaruskali's currency proceeds in 2011 were 3.2 billion dollars. The currency proceeds for 11 months of 2012 didn't exceed 2.5 billion dollars (about 14.7% of country's total currency earnings). Belarus sold potash fertilizers to India at $490 per tonne, while Chine bought them at $470 per tonne. By shipping, for example, 1 million tonnes of potassium chloride to China at a new price in Q1 2013, Belarus will loss 70 million dollars.

There's no information regarding contracts to supply fertilizers to India, which is the largest consumer of Belarusian potassium chloride alongside with China. Experts, however, think the price will not exceed $400 per tonne. Moreover, India cut subsidies for farms, which are main consumers of potash fertilizers, due to devaluation of the national currency.