Uralkali forms JV with Federal Land Development Authority of Malaysia that will secure potash deliveries to state-owned plantations in Malaysia, other countries; deal could boost Uralkali's sales in Malaysia, Indonesia, up from 200,000 tonnes in H1 2013

Allison Oesterle

MOSCOW and KUALA LUMPUR, Malaysia , December 9, 2013 (Thomson Reuters Corp.) – * Uralkali in JV with Malaysian FELDA to boost potash sales

* JV to sell at least 1 mln T in southeast Asia a year

* No clarity on future of FELDA imports from Canpotex

Russia's Uralkali , the world's top potash producer, has agreed a supply deal with Malaysia's state-owned plantation owner, the latest move in a global battle over pricing and market share between makers of the crop ingredient.

Uralkali said on Monday it had formed a joint venture with the Federal Land Development Authority of Malaysia (FELDA) which would secure potash deliveries to plantations including those owned by FELDA in Malaysia and other countries.

The deal could boost Uralkali's sales in Malaysia and Indonesia, a major market for potash due to demand from the palm oil industry. Uralkali's sales in the region were only 200,000 tonnes in the first half of 2013 compared with 1.2 million tonnes in 2012 as a whole.

Uralkali's move comes amid rising competition among potash producers, fuelled earlier this year by Uralkali itself when it quit a cartel of producers based in Russia and Belarus which had controlled 40 percent of the $20 billion global potash market.

The withdrawal from the cartel hit global prices of the soil nutrient and left a group called Canpotex - owned by Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc - as the world's top export group.

Potash Corp spokesman Bill Johnson said neither the company nor Canpotex had any comment on the deal.

Canpotex has offered potash at reduced prices, biting into rivals' share of the Malaysian and Indonesian markets, sources close to the matter told Reuters earlier this year.

STRATEGICALLY IMPORTANT

Canpotex had in 2010 signed a five-year memorandum of understanding with Indonesian buyers to supply a total of 3.75 million tonnes of potash, which made it the country's biggest supplier. Speaking during a briefing in Kuala Lumpur, FELDA officials declined to say whether the body would stop buying from Canpotex.

"This (Malaysian) joint venture is another step to further improve our sales net in southeast Asia, which is a strategically important region for Uralkali," Viktor Belyakov, Uralkali's acting chief executive, said in a statement.

The venture involves securing at least 1 million tonnes of Uralkali's potash sales to southeast Asia per year, FELDA Director-General Ahmad Faizoull told reporters.

"They need us and we need them. If we did not grab this opportunity, we might be paying more for potash," Faizoull said.

Neither Uralkali or FELDA said what price would be paid for the potash being supplied under the agreement.

Shares of Canpotex partners Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc were down less than 1 percent in early trading. Uralkali shares in Moscow were down 0.7 percent at 166.55 roubles.

Malaysia and Indonesia supply about 90 percent of the world's palm oil. FELDA is a major shareholder of Felda Global Ventures Holdings Bhd (FGV), the world's third-largest palm plantation operator.

Other Malaysian palm oil planters include Sime Darby , IOI Corp, IJM Plantations and Kuala Lumpur Kepong.

Major palm oil firms operating in Indonesia include PT Sinar Mas Agro Resources and Technology and Singapore-based Wilmar International Ltd.

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