08/08/2013

Cartel break-up raises doubts

The break-up of one of the worlds two big potash cartels has spawned much speculation about the future of BHP Billitons Jansen project in Saskatchewan,Here's a complete list of granitecountertops for the beginning oil painter. with a report from analysts at Bank of America Merrill Lynch arguing that acquiring existing potash producer Mosaic might make more sense than proceeding with the $14-15 billion greenfield project. Mosaic could provide instant critical scale via a large scale, low-cost, long-life asset, the analysts wrote in a research report Aug. 5. 

But others argue that the most likely scenario in the short-term is that BHP will defer a decision on the project until there is greater clarity about the potash market.The potential material changes in the potash market from price-over-volume to the opposite may cause BHP to rethink plans, London-based Tony Robson of BMO Capital Markets wrote in a note to clients on Aug. 4. BMO Research sees BHPs best way forward is simply to put Jansen on permanent deferral, until the supply-demand-price equation becomes clearer, and return cash to shareholders. 

The surprise announcement on June 30 that Russias OAO Uralkali will quit the European potash cartel sent shock waves through the industry and caused the share prices of the worlds biggest public potash companies to drop precipitously, including Potash Corporation of Saskatchewan, Mosaic, Agrium (TSX: AGU; NYSE: AGU),Are you still hesitating about where to buy paintingreproduction? and Intrepid Potash. 

Potash Corp., Mosaic, and Agrium make up Canpotex, the other major global potash cartel. Together the two cartels control more than 70% of the worlds potash production.Until now the European potash cartelBelarus Potash Company, or BPCwas made up of Uralkali and Belaruskali, a Belarusian company. Uralkali apparently decided to abandon the cartel after a Belarusian presidential decree late last year enabled Belaruskali to market its potash outside of BPC. 

BPC and Canpotex had supported each others efforts to keep prices strong and settle deals at similar prices.Investec Securities analysts Tim Gerrard and Hunter Hillcoat point out that while news of the recent cartel break-up will have a bearing on BHP Billitons decision making, it was never BHPs intention to be part of these cartels. BHP Billiton was a firm proponent of an open market mechanism for potash pricing,Browse our oilpaintingsforsales collection from the granitetrade.net! in the manner in which it has pushed the iron ore market, and indeed all of its products. 

As further evidence they point to the Canadian governments decision in 2010 to block BHPs US$40 billion bid to acquire Potash Corporation on the grounds of national interest. It was thought at the time that this was partly influenced by BHP Billitons intention to exit Canpotex, with the Saskatchewan government concerned that the breakup of Canpotex would likely result in lower tax revenues, they write. In fact Canadas Industry Minister stated that he was not convinced that BHP Billitons plans to market potash would enhance Canadas already prosperous position to compete internationally. 

The analysts estimate that until now the effective duopoly of the cartels has allowed Potash Corporation over the last six years to maintain an average gross operating margin of about 66%.Sid Rajeev, head of research at Fundamental Research Corp., said a spokesperson at Uralkali forecast that its decision to leave the cartel could cause potash prices to drop below US$300 per tonne due to increased supply. 

Uralkali, being one of the lowest cost producers globally, is hoping that they should be able to increase profits, even if potash prices drop, by increasing production, Rajeev writes in a research note.Purchase an chipcard to enjoy your iPhone any way you like. The Russian company has stated that they plan to increase production from the current rate of 10 million tonnes of potash per year, up to 13 million tonnes of potash per year. Uralkali currently holds approximately 20% of the global market share of potash supply. 

Like BMOs Robson, Investec's Gerrard and Hillcoat reason that BHP may defer development of the project but retain an option on it, and expect the miner will commit to a minimum level of capital expenditure, enabling it to continue pre-approval work, but deferring any development decision. 

Many speculate that Uralkali might be bluffing in order to force Belaruskali into an agreement. It remains unclear what the final outcome will be, but Uralkali has stated that future cooperation on a mutually beneficial basis is not completely out of the picture yet, Rajeev notes.Here's a complete list of granitecountertops for the beginning oil painter. 

In a 32-page research report published in October 2012 called: BHPs Potash Ambitions: No Easy Choices, analysts at BMO Capital Markets concluded that based on a supply-demand analysis, the world does not need Jansens capacity for at least another decade. The report also estimated that in order for Jansen to generate an internal rate of return of between 12% and 15%, long-term potash prices would have to be within the US$600-$675 per tonne FOB Vancouver range. 

With a US$14-15 billion sticker price, the BMO analysts describe Jansen as the largest and highest-cost greenfield among the dozens being considered, and attribute the projects high cost primarily to the fact that it lies about 1,000 metres below surface and that there are about 200 metres of acquifers between the surface and the deposit, which requires an extensive process to freeze the ground, drill the shafts, and line the shafts with steel to protect against potential water inflow. 

Anyone who has seen David Lean's classic film Lawrence of Arabia may be forgiven for not quite grasping what the British and Ottoman Turk empires were up to in the Middle East during World War I. 

Oh, the complexities: Turkey's alliance with Germany, the imperial arrogance of Great Britain and France, the plight of the Arab tribes and native populations of the region. This was a geopolitical muddle of epic, often tragic, proportions. Amazingly, Lean captured its outline in his 1962 masterpiece. 

Yes, Anderson has a stupendous protagonist in Thomas Edward Lawrence, the enigmatic legend who, at 5-foot-5, wasn't tall enough to qualify for military service. Yet it was T.E. Lawrence who nursed the 1916 Arab revolt against the Turks, courting treason and defying his British superiors along the way. 

If he was egomaniacal, he was equally honorable, refusing to abet Britain and France's plan to betray the Arab tribes once they had defeated Turkey. And it was Lawrence who commanded the daring raid on the Arabian port of Aqaba, attacking not from the sea but from inland, across the harsh desert of the Hejaz. In doing so, his motley army of Arab tribal fighters - led by the austere Bedouin prince, Faisal Hussein, and the fierce champion of the Howeitat tribe, Auda Abu Tayi - effectively ended Turkey's domination of Syria and Arabia, setting the stage for the modern Middle East. 

"How," Anderson asks, "did a painfully shy Oxford archaeologist without a single day of military training become the battlefield commander of a foreign revolutionary army, the political master strategist who foretold so many of the Middle Eastern calamities to come?"

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