The phosphate environment
In its September Market Overview report, PotashCorp (POT) stated that the gains in phosphate prices earlier this year were reversed due to excess supply and weakness in demand from India. The environment for phosphate fertilizer, which remained weak for the most part of this year, got an unexpected lift in recent months. Hurricanes in the Southern US (NANR) led to a reduction in global phosphate inventory.
The phosphate industry continues to be negatively impacted by excess supply. Mosaic (MOS), which is one of the largest producers of phosphate globally, will idle its 2 million ton capacity of production. However, the company also expects new capacity to come online in Morocco and Saudi Arabia.
As for the demand, Agrium (AGU) indicated in its 3Q17 earnings release that India has been a weak spot for producers due to weak imports. However, the company expects the situation to turn favorable in 2018 on the back of inventory drying up in the country in 2018.
For the remainder of 2017, PotashCorp has a “muted outlook.” The prices may also see higher levels in the coming year due to an increase in prices for raw materials such as ammonia and sulfur. According to Agrium, ammonia prices rose 40% to 70% and sulfur prices rose 40% to 120%.
To read more about the recent analyst ratings on some of the major fertilizer players including Sociedad Química y Minera de Chile (SQM), read our series titled Agribusiness Stocks: November Post-Earnings Update.