The potash segment was perhaps the strongest performer for fertilizer companies in 3Q17. The strength in demand and the tight supply of potash (XLB) supported higher price realizations for potash prices of the companies we’ll look at in this part.
Median potash shipment growth
The median shipment growth of the five companies in the above chart was flat YoY (year-over-year) in 3Q17. Compare that to a shipment growth of 27% in the corresponding quarter a year ago. Among the five companies, PotashCorp (POT) was the only one to have a meaningful growth in shipments YoY.
Shipment growth by companies
PotashCorp’s potash shipments rose 13% YoY to ~2.9 million metric tons. Israel Chemicals (ICL) and Mosaic (MOS) had nearly flat shipment growth YoY. Israel Chemicals shipped 1.4 million metric tons, and Mosiac shipped 2.2 million metric tons of potash during the quarter. In contrast, Agrium’s (AGU) potash shipments for its wholesale segment fell 7% YoY to 462,000 metric tons. Intrepid IPI’s (IPI) potash shipments declined 13% YoY to 109,000 metric tons.
Why shipments grew
It’s important to understand why potash shipments grew during the quarter. That helps us look at drivers we can track and make a qualitative investment decision for our investments in this sector (MOO). According to PotashCorp, its shipments grew primarily due to a high affordability of fertilizers and a stronger demand in international markets. That was echoed in Israel Chemical’s 3Q17 press release.
On the other hand, shipments for Intrepid Potash declined primarily as a result of lower production volumes due to the company’s converting its potash production facility to produce Trio. Trio is a crop nutrient with langbeinite as a base and, according to the company, is used in magnesium-deficient soils.
You can track fertilizer affordability each week on the Market Realist website. The latest release is How Did Fertilizer Prices Move Last Week?
The median gross margin for the potash segments of the five companies in the above chart was 24%. A year ago, in 3Q16, the median was 9%.
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