Uralkali (Berezniki, Perm Territory) will set the ceiling price of 3,700 Russian rubles per tonne (FCA, exclusive of packaging) for its potash fertilizers to Russian agricultural producers in the second half of 2009, thus maintaining the price set for in H1 2009. This is in line with the terms and conditions of the agreement between the Russian Association of Fertilizer Producers (RAPU, one of whose founding members is Uralkali) and the Agri-industrial Union of Russia, Uralkali (Berezniki, Perm Territory).

In Q4 08, the global economic downturn caused substantial changes in the balance between supply of and demand for potash fertilizers. Main foreign customers, who traditionally purchased the largest amount of muriate of potash (MOP), decreased their consumption due to the lack of credit resources. As a result, in Q4 08 Uralkali operated at 25% of its production capacity. In Q1 09, the Company's capacity utilization increased to 35%. Uralkali had to maintain considerable expenses while operating at lower than usual capacity levels, which led to an increase in the Company's product unit cost for MOP. However, Uralkali fully understands the need to support domestic agricultural producers during the downturn. Therefore, despite the increase in its MOP production costs, the Company decided to retain preferential prices for agricultural producers and maintain the highest price for its potash fertilizers intended for direct fertilization by Russian agricultural producers at the previous level.

Background:

The Cooperation Agreement between RAPU and the Agri-industrial Union of Russia was signed on October 17, 2008, to ensure that demand is satisfied for mined fertilizers in 2008–2012. The Agreement specifies that Russian producers of mineral fertilizers should declare prices for their products intended for agricultural producers on a biannual basis, on November 15 and May 15.