http://blog.intelligentinvestor.com.au/doddsville/the-potash-cart...

http://blog.intelligentinvestor.com.au/doddsville/the-potash-cartel-bust-up/

...That was the problem; high prices encouraged more production. In recent years new potash projects have sprouted the world over, from Australia to Eritrea to the Congo. New entrants want to be able to gain from the cartels high prices without being curbed by its rules.

Uralkali, perhaps the worlds lowest cost producer, has succumbed to economic temptation. It will increase production dramatically and potash prices will fall. This is a devastating outcome for new entrants into the industry. Potash is notoriously difficult to mine. Found deep underground, new projects require colossal upfront capital that cannot be justified with lower prices. Most new projects – including BHP’s own giant Jansen project – are likely to be canned.

Over the long term, however, the bust up of the cartel is wonderful for the industry. Low cost incumbents still make high returns on capital and, with new entrants deterred, can continue making money untroubled. The former communists have proved to be the best capitalists of all.