(Adds context, details, analyst comment)
GARLYK, Turkmenistan, March 31 Turkmenistan
opened a $1 billion Belarussian-built potash plant on Friday,
aiming to export 1.2 million tonnes of fertilisers to China and
India per year as part of its drive to diversify away from
natural gas exports.
The Central Asian nation has faced foreign-currency
shortages after its gas exports were hit by declining prices and
volumes, and the government is banking on the start of potash
production and other projects to bolster the economy.
As a potash exporter, Turkmenistan will compete with its
former Soviet overlord Russia, home to the world's biggest
producer Uralkali, and Belarus, also a global player.
Belarussian companies built the plant and Minsk has said it
will help Turkmenistan market the product.
Belarussian President Alexander Lukashenko attended the
opening ceremony in eastern Turkmenistan and said most of the
plant's production would go to China and India - the world's
biggest potash importers.
"This is Central Asia's biggest potash plant. One can
confidently say it will produce 1.5 million tonnes a year,"
Lukashenko said, adding that Turkmen President Kurbanguly
Berdymukhamedov had told him about plans to build two more
Uralkali said this month it expected global potash demand to
rise by 1-2 million tonnes this year to between 62 million and
63 million tonnes, driven by China.
It was unclear when the new plant would reach production
capacity and how much potash it would produce in 2017.
The plant was launched two years later than the original
deadline, in part because the market for the crop nutrient has
been hit by strong competition since 2013, when Uralkali quit a
trading alliance with Belarusian potash producer Belaruskali.
Lukashenko said the project had encountered some technical
difficulties but the issues had been resolved.
"Despite all the drawbacks, I think we have not let down the
Turkmen people," he said, without elaborating on the nature of
the technical problems.
Global potash producers are still suffering from strong
competition, low prices for agricultural commodities and weak
demand from India and China.
New potash production capacity is expected to be launched by
Germany's K+S in Canada and by Russia-focused
fertiliser producer Eurochem in Russia in 2017.
"We already see a crisis of overproduction in the sector.
The new project will only strengthen the competition," said Oleg
Petropavlovskiy at BCS Investment Bank.
Petropavlovskiy said potash from Turkmenistan might be
interesting for spot markets in Southeast Asia and South
America. He did not rule out that Turkmenistan could also sign a
long-term supply contract with China.
Uralkali declined to comment.
(Reporting by Marat Gurt; Additonal reporting by Polina Devitt
in Moscow and Natalia Shurmina in Yekaterinburg; Writing by
Olzhas Auyezov; Editing by Dale Hudson and Susan Fenton)