Haifa Chemicals yesterday announced that it's shutting down its plants in Haifa and Mishor Rotem, and sending 800 workers home, because its raw materials have become unaffordable. CEO Nadav Shahar wrote a letter to workers, blaming the trouble on the soaring price of potash sold by Israel Chemicals, a Israel Corporation company.
Haifa Chemicals makes 30% of the world's "green" fertilizer - potassium nitrate, sold to more than 100 countries, Shahar wrote. But potash is a central cost and its price has risen by more than 600% in the last five years, to more than $600 per ton.
In January this year its price doubled, he wrote, destroying Haifa Chemicals' competitiveness as the global economy writhes. Demand for fertilizer has dropped together with the price of agricultural commodities in world markets. Unable to sell crops for top dollar, farmers have cut back their fertilizer purchases.
"The Israeli government gave the Dead Sea Works, of the Israel Chemicals group (a private company owned by the Ofer family) exclusive mining rights to potash ... turning it into a monopoly," Shahar wrote. "Despite that, in 2006 the government rescinded supervision over potash prices, enabling ICL to raise the price [of potash] to industry by 400% in the last three years."
Haifa Chemicals spent the past two months negotiating with the Dead Sea Works management, yet despite its mounting stockpile of mined potash, the company refused to sell it potash at a reasonable price, he wrote.
So, "Haifa Chemicals has no choice but to shut down its production lines until ICL can be persuaded to sell us potash at a reasonable price," he said.
ICL was not amused. "The claim that ICL has a monopoly over potash is brazen, populist chutzpah and beyond all else, a lie," the company said. "ICL is just one of the potash producers in the world."
Dead Sea Works has been supplying potash to Haifa Chemicals for decades. But Haifa Chemicals has in the past, and could again could choose to buy its potash from whomever it likes, ICL said.
"During 2008 Haifa Chemicals earned a great deal of money from the potash price it paid based on the agreed-on formula with ICL," the latter went on to state. "It is strange that it didn't complain about the price then. It is even stranger that the company's management didn't think to set aside reserves from these profits to cope in case the price of raw materials increased."
Apparently norms of incitement and populism have penetrated the business world, ICL went on to say. "It is a shame that this is being done at the expense of the Haifa Chemicals workers."
Incidentally, the Antitrust Authority does define ICL as a monopoly over potash production in Israel.
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