While higher grain prices are a positive for potash producer shares, the overall near term outlook for the sector is bleak; at least according to Goldman Sachs.
It will take a change in the fundamentals of the potash market before producers will see an increase in share value. After a strong start to 2010, fertilizer consumption fizzled in the second quarter.
Potash producers continue to struggle in today’s economic climate. Analysts are confident in the long-term health of the sector, but in the short-term pressure will remain.
According to Goldman Sachs, over the next few years global potash demand will grow around 4 percent per annum with emerging market food requirements playing the key driving factor in fertilizer demand.
Dmitri Rybolovlev’s recent sale of 53.2 percent of Uralkai stock to an investors group, led by Mr. Kerminov, has led to rumours of a significant merger in the potash industry. About $11 billion of fertilizer and agricultural-chemicals mergers and acquisitions have been announced or completed since the end of 2008.
Potash has attracted a lot of attention from analysts since the nutrient rose from relative obscurity, worth around $150 per tonne, to a hot commodity that rapidly rose to hit $1000 per tonne. As the price of the crop nutrient skyrocketed, some bold investors profited handsomely.
Potash is taking its time to jump aboard the commodity rebound. The most recent deal for potash was settled between Canpotex and China to sell the crop nutrient for $370 per tonne, just $20 per tonne more than what the crop nutrient was fetching six months ago.
Potash Corporation of Saskatchewan, the globe’s largest potash producer, believes that for the potash industry, the best is yet to come.
China’s recent growth slowdown put a huge dent in the commodities rally- but how will threats of stalling Chinese growth impact the potash market? Fortunately for potash, demand is not a China-only-story.
A revival in potash sales around the globe is helping potash miners' bottom line, a welcome relief after a dismal 2009 season.
Wednesday, July 21, 2010