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Competitive advantages of the mining and chemical companies

For definition of features of formation and sources of competitive advantages it is necessary to mark out, first of all, the main branch features of a mining and chemical complex which detailed analysis has been presented in chapter 1.

As it has been noted above, despite existence of general characteristics of branch of mineral fertilizers, subsectors of different types of fertilizers differ among themselves a little. So, for example, reserves of potash raw materials differ in a high concentration - more than 80% of all world reserves of potash raw materials are only in three countries (Canada, Russia and Belarus) [102]. At the same time it should be noted that potash ores of Russia have the highest content of potassium in comparison with ores of other countries, and expected resources are huge - about 11,5 billion t of stocks of category PI and P2. Also, for example, the Russian base differs in favorable conditions for a bedding of layers that provides to mining companies the lowest cost of extraction of potash ores on branch.

Practically most it is possible to tell also about reserves of phosphatic ores. A basis for production of phosphoric fertilizers in Russia are apatite ores. More than 40% of apatite ores settle down on unique nepheline - apatite fields of Hibinsky group. Raw materials from these fields are one of the most qualitative in the world and are suitable for receiving any kinds of phosphoric fertilizers [107].

Cost of production and processing of ore - the main article in structure of cost of production of mineral fertilizers, including diammonium phosphate (DAP) - about 51%. Use of high-grade raw materials (P205> of 35,7%) for production of fertilizers promotes receiving production of the highest quality and considerable cut in expenditure for her further processing.

At the same time the segment of nitrogen fertilizers differs from the others a little. As it has been specified, as a main type of raw materials for production of this type of mineral fertilizers serves natural gas which production volumes considerably exceed volumes of extraction of raw materials by other types of fertilizers. At the same time natural gas occupies a high share in structure of cost of production of nitrogen fertilizers that needs also to be considered when forming competitive advantages. For example, because of restrictions of gas prices all producers of nitrogen fertilizers of Russia have advantage in comparison with producers of North America and Western Europe, however, considering the speed of liberalization of the market of gas and the electric power, soon this competitive advantage can be lost.

Thus, the mineral resources and access to raw materials are the main sources of steady hereditary competitive advantages to the companies of mining and chemical branch. It should be noted that raw independence of the large companies on potash, phosphatic and nitric raw materials considerably increases their competitiveness.

To one more of sources of competitive advantages of the mining and chemical companies can serve the fact that in view of geographical attachment of places of production to fields of mineral of the place of production, processing and consumption can be in considerable remoteness from each other. In this regard logistic expenses make one of the main articles in structure of cost of production. Therefore formation of effective logistic and marketing system with own transport and logistic assets is one of key activities of the large companies of a complex.

As it has been noted, one of key features of mining and chemical branch is high degree of concentration. The world mining and chemical branch is presented by 15 largest producers which 6 Russian companies are among. Especially it concerns potash branch where about 12 companies operate on all world market. In such conditions feature of formation of competitive advantages is need and the arising possibility of the careful analysis of competitors in view of their limited quantity. At the same time in the conditions of close interdependence of competitors action of each player exerts considerable impact on the market in general. Therefore there is extremely important a finding of such competitive advantages which can't be simulated by competitors, but also to some extent can affect a condition of the market in general.

To one of sources of unstable competitive advantages to the mining and chemical companies of Russia in the world market can serve decline in the rate of national currency. International trade in mineral fertilizers assumes payments in US dollars. As a result of depreciation of ruble in relation to dollar cost of production has considerably decreased (the Uralkali company, for example, had essential such decrease - from 60 to 47 US dollars for ton of finished goods only due to change of course). Such situation allows the companies or to reduce the products price for foreign consumers, or to get additional profit. Thus, the Russian producers of mineral fertilizers thanks to weakening of ruble exchange rate can keep the competitiveness in the world market.

In view of seasonality of demand for mineral fertilizers, and also to unevenness of consumption of fertilizers on regions of the world, as one more sphere of formation of competitive advantages of the mining and chemical companies serves ensuring flexibility of deliveries. For example, currently China has considerably increased the offer in the market of main types of mineral fertilizers, than has seriously limited the potential of growth of the world prices. Nevertheless, the global market of mineral fertilizers currently is balanced as in some countries there were difficulties with deliveries to export, in particular, in Ukraine and in Egypt. Thus, diversification of production and sales markets allow the companies to react to any changes of market condition flexibly.

Respectively, at increase in demand for production in the concrete region for a number of reasons (adverse weather conditions, low productivity, increase in demand for food, etc.) that company whose presence in the market of this region is considerable will have competitive advantage.

As it has been noted, one of the main features of the market of mineral fertilizers - his oligopolistic character which also defines opportunities and features of formation of competitive advantages of the mining and chemical companies.

Characteristic signs of an oligopoly [79] and branch features of functioning of the mining and chemical companies are presented at the oligopolistic market in table 3.2.

Table 3.2

Branch features of functioning of the mining and chemical companies on oligopolistic market

Characteristic signs

Branch features

Limited number of sellers

Presence at major companies of the market power. The separate mining and chemical companies control considerable shares of the market that allows them to exert impact on market parameters. High degree of concentration in the market defines strong competitive fight

Great number of buyers

As buyers of production end users (several hundreds of thousands of farms) in most cases act. In the countries of presence products are sold through own marketing divisions or the international traders. Any of buyers can't exert impact on conditions of the conclusion of market transactions and level of the competition in the market

The standardized product

Mineral fertilizers of various producers are identical and completely replace each other; it is production which the consumer buys from any seller on condition of the identical price. Goods substitutes are absent

Existence of branch barriers

Entry into the market demands the considerable expenses connected, first of all, with need of a gain of a considerable share in the oligopolistic market for receiving a part of branch profit and also with a high capital intensity of production

Existence of interaction of firms

The decision of each mining and chemical company influences a market situation and at the same time depends on decisions of competitors: making the decision, the company considers possible reaction of other participants of the market. There is a possibility of conspiracy.

At the same time pricing in the market of mineral fertilizers is carried out by the principle of leadership - most the mining and chemical companies seeks to establish approximately the same price, as well as the leader of the market (the price competition).

We will consider competitive advantages of the largest mining and chemical companies of Russia.

PhosAgro company

Raw materials of the PhosAgro company possess the lowest indicators of toxicity and radioactivity in comparison with ore of other largest global manufacturers of phosphatic raw materials (table 3.3). Maintenance of elements harmful and hazardous to health of the person, such as cadmium, arsenic, mercury and lead, very low [127].

As a rule, quality of an apatite concentrate is determined by the level of contents P205. Concentration of P205 in an apatite concentrate of PhosAgro makes 39-40% while at production of the main competitors of the company this indicator is significantly lower - at the level of 28-32%.

Considerable competitive advantage of the company is the flexible business model. Flexibility of production capacities allows to optimize the range of products and consumption of raw materials. The PhosAgro company is capable to react quickly to change of demand and market condition, in short terms switching between production of MAP, DAP, NPK and NPS.

Table 3.3

Quality of phosphatic raw materials of the leading global manufacturers of phosphoric

fertilizers

Company

Content P205

Content of heavy metals (average content of cadmium of mg/kg)

The relative indicator of content of impurity (value> 0,1 complicates production of high-quality DAP)

PhosAgro

39,0-40,0 %

<0,1

0,02-0,05

EuroChem

37,0-38,0 %

<0,1

0,11

Agrium

33,0 %

5

<0,1

OCP

32,0 %

15-40

0,02-0,04

PCS

29,5 %

12-15

0,05

CF Industries

29,0 %

9

0,1

GCT

29,0 %

40

0,05

Mosaic

28,5 %

9

0,1

Source: data of the companies, PhosAgro, Fertecon

The flexible distribution system of production includes the export which isn't tied to foreign distributor network and also the system of sales aimed at maximizing profit. The company has no own distributor network outside Russia and therefore it isn't tied to certain markets that gives the chance to choose the direction of sale with the most favorable price [127].

Possibilities of the PhosAgro company surpass requirements of her subsidiaries therefore, if necessary, there is an opportunity as much as possible to use an apatite concentrate for production of fertilizers or, on the contrary, to sell more apatite concentrate and to produce less fertilizers in production of an apatite concentrate if the prices of fertilizers fall, and on a concentrate grow. Thanks to flexibility of production capacities and the marketing strategy of the company loading of capacities for production of fertilizers made about 100% in recent years that provides predictable demand for the extracting business and promotes his stable work.

The company releases 28 brands of production that gives her the chance to deliver to farmers and agroholdings of fertilizer, suitable for cultivation of crops in any region of the world.

Besides, unlike other companies, PhosAgro realizes mineral fertilizers directly to farmers and large agroholdings in Russia through own network of the centers of distribution under control of PhosAgro Region. Also the company seeks to come into direct contacts with buyers in the priority international markets.

Besides, for the PhosAgro company maintenance of the status of the producer with low expenses by use of capacity of the scientific organizations of holding and implementation of technological development of mining production can become key steady competitive advantage.

 
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