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Comparing 8 Fertilizer Companies' Performances in 2Q16

PART:
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Part 10
Comparing 8 Fertilizer Companies' Performances in 2Q16 PART 10 OF 14

Why Phosphate Prices Fell for Producers in 2Q16

Ammonium phosphates

Ammonium phosphates are the most widely used phosphate fertilizers in the world. DAP (diammonium phosphate) is the most used among phosphate fertilizers, according to Mosaic Company (MOS), which is one of the largest producers of phosphate fertilizers.

DAP prices have remained firm over the past few quarters. Let’s see how they performed in 2Q16 for some of the largest producers.

Why Phosphate Prices Fell for Producers in 2Q16

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Average realized prices

Average realized phosphate prices fell by 20% for the above three companies YoY (year-over-year) in 2Q16. The average realized prices for DAP were the lowest for Mosaic Company during the quarter.

Previously, we saw that Mosaic also had the highest sales volumes for its phosphate shipments. The company’s scale of production has helped it to keep its production costs low and offer attractive pricing programs to its customers. In 2Q16, Mosaic’s average realized price for DAP stood at $343 per ton. However, this was 24% lower than $450 per ton in 2Q15.

Agrium’s (AGU) average realized phosphate prices also fell by 21% to $526 per ton from $685 per ton in 2Q15. PotashCorp (POT) had an average realized price of $397 per ton in 2Q16, a fall of 17% from $524 per ton in 2Q15.

Why prices fell

According to PotashCorp’s management, prices fell as a result of weakness in market (MXI) demand. As customers waited to gauge further direction in average prices, demand was pushed back, resulting in further pricing pressures.

In addition, Israel Chemicals’ (ICL) 10-Q filings cited currency exchange rates as a reason for phosphate price falls in the market.

Next, let’s discuss the phosphate segment’s gross margins.

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