Actuality February 22, 2008

   The continuing price growth in the world market

of mineral fertilizers provoked the surge of capitalizations of some Russi an

producers. The most growth show potassic and phosphorous producers, while nitrogenous enterprises do not trade practically. Analysts connect this to the corporate risks of the similar Russian plants.

   In February the main surge in prices fell to phosphorous fertilizers on the world market, is said in the review of AtlantaPioglobal Investment Group.

Amorphos and diammonium phosphate attained their historical maximum, exceeding $800 per a ton, and prices for the African diammonium phosphate with delivery already attained $850 in March, and exceeded the level of the year beginning by 40%. In February of the last year the average cost of FOB (the cost of a seller in port) for diammonium phosphate was $310 (thus, the growth totaled 174%). It is said in the review that in future one has to expect continuation of cost growth of phosphorous fertilizers taking into account the world deficit on this products.

   However, the world price grows not only for phosphorous fertilizers.

So, the middle FOB price for carbamide grew by 17% for the last year (from $300 to $350), for ammonium nitrate – by 64% (from $187 to $307), for ammonia – by 96% (from $282 to $553), for NPK – by 162% (from $206 to $540).

   The Russian prices are not so high yet, however, pull up to the world level. "Last year phosphorous fertilizers grew in price most on the internal market, on the second place – potassic ones", says the head of analytical department Georgiy Ivanin.

On this basis he highly estimates the growth potential of stocks of OJSC Ammophos ($222 against current $152,5 on RTS), the largest Russian producer of phosphorous products. However, its capitalization on RTS has already grown by 60% from the beginning of the year and totaled $1,488 bln. And the highest capitalization growth in industry shows OJSC Apatit from the beginning of the year that monopolistically supplies raw material for phosphorous fertilizers to the internal market: from the moment of trades beginning the company value grew almost twice. "In spite the fact that prices for apatite concentrate are regulated by the state (in 2008 on the internal market will be sold 90% of OJSC Apatit products) and, accordingly, are not high, the part of products is sold at exorbitant prices on a stock exchange, therefore there is understanding of the real cost of this product", says Marina Alekseenkova, the analyst of Renaissance Capital. Mikhail Frolov from Finam Investment Company connects OJSC Apatit growth with the world tendency to appreciation of all enterprises, possessing unique phosphorous reserves, however at the moment considers it already overestimated.

   Continue growing prices for potassium chloride, the Russian producers of which OJSC Uralkali and OJSC Silvinit export about 90% their products, in the aggregate occupying about 18% of the world market.

For the last year the average price for C+F (buyer cost and freight) on the world market grew by 123% – from $220 to $490. Thus, even those consumers that traditionally buy in the large volumes of potassium with the substantial discount are forced to go to the terms of producers because of the world deficit for this product.

So, the last contracts with the importers of South-Eastern Asia OJSC Uralkali concluded for $550 per a ton. Now OJSC Uralkali plans to raise the price for the basic user of China twice (up to $500). Meantime, OJSC Uralkali capitalization on RTS the last year already grew more than twice from the moment of its public offering in October. And OJSC Silvinit capitalization grew only by 24% from the beginning of the year.

   However, capitalization of the Russian nitric producers does not grow, and the trades' volumes of their stocks are minimum.

Georgiy Ivanin relates it to the corporate risks which have the majority of enterprises. "Nevinnomyssky Azot" and "Novomoskovsky Azot" have small free-float of about 5% stocks; EuroChem Mineral and Chemical Company proposed a voluntarily offer at price close to the quotations of the companies, but there is a risk of the forced repayment of these stocks in case of overcoming 95% barrier", an analyst reasons. "On "Togliattiazot" lasts the corporate conflict between stockholders for a long time, and Uralkhim Incorporated Chemical Company, the owner of JSC Azot (Berezniki), is rather interested in the capitalization increase of the parent company on the threshold of the possible placement". The only exception among nitric producers is JSC Dorogobuzh, which capitalization grew by 65% only for the last month. However, Georgiy Ivanin explains it that the enterprise owns 8,5% stocks of the parent company, JSC Acron that conducts the active preparation to IPO now.

From the beginning of the year JSC Acron capitalization grew by 43% on RTS.