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With potash prices riding high, and fertiliser fundamentals growing strong, Potash Corp, is expected to have a strong second half this year.Citi analyst P.J. Juvekar explains why:
- Fall is expected to be a strong season for fertilizers after Spring application came in 10% lower that expected because of a slow start to planting. With grain prices riding high, farmers are expected to usmore fertilizers to maximise yields.
- Supply of Chinese diammonium phosphates (DAP) and urea exports may be restricted because of the nation’s sliding scale tariff policy. Urea exports are projected to decline to 5 million metric tons, from previous 7mmt, while DAP exports are expected to fall to 2mmt from 4mmt last year.
- The DAP market is also expected to be tight because of a ruling that has barred phosphate mining company Mosaic from mining in South Fort Meade. The Mosaic Company may also have to buy large quantities of phosphate rock which is likely to constrain the market making room for Potash Corp.
- Rising spot prices and the floor price for potash set by the China contract bode are expected to maintain price momentum. India imports all of its potash but even with a lack of contract settlement there, high global demand has kept the market tight. Potash Corp is looking for $590/st price for shipments later this year and expectations are that a portion new prices will be accepted by Q4.