By Leia Michele Toovey- Exclusive toPotash Investing News
0diggsShareConcernsabout adverse weather in western Canada and Russia are sending grainfutures on a rally. This is good news for diammonium phosphate andother phosphate based fertilizer prices. Since June, rising grainprices have propelled the price for the crop nutrient to new highs,with phosphate prices averaging $431 over the past quarter, 55 percentmore than the previous year-on-year period. Diammonium phosphate, forimmediately delivery, has increased 66 percent this year.
Increasing demand, combined with declining stockpiles has prompted China to mull export restrictionsin order to protect their much needed domestic supply. Record breakingshipments over the summer have caused a dramatic decline in China’sdomestic inventories. “Government officials are increasingly concernedabout the availability of phosphate products for domestic farmers andare closely monitoring the situation,” said Mike Rahm, Mosaic’s ChiefMarketing Strategist. “We believe officials will take whatever measuresare necessary, including more restrictive export policies, to ensureadequate supplies of competitively priced phosphate for domesticfarmers.”
Demand for fertilizers will grow over the next 40 years as a largerand increasingly wealthy world population consumes more meat and eggs,said David Dawe, a senior economist with the UN’s Food and AgricultureOrganization. Food and energy prices increasingly will be linked withpotentially high fuel costs, spurring fertilizer use as farmers seekgreater efficiency. Agricultural output will need to rise faster thanthe supply of arable land, forcing farmers to seek greater crop yields,he added.
Credit Suisse lifted its forecast for both nitrogen and phosphateprices over the next two years following the rise in crop prices.Projections for prices for potash,the other of the big three nutrients, were kept at previous levels,foreseeing a gentle rise through 2011 and 2012. However, while evenCredit Suisse’s upgraded hopes for phosphate implied a decline inprices from current levels of $525 to 550 a tonne, its outlook fornitrogen implied continued gains.
Output Expansion
Saudi Arabian Mining Co, the state-run producer, may doublephosphates output at a venture it’s developing with Saudi BasicIndustries Corp, the world’s largest petrochemicals maker.The partners plan to bring a 2.9 million tonnes a year diammoniumphosphate plant at Ras al Zour on the Arabian Gulf coast into operationearly next year, according to Khaled Al Mudaifer, vice president forphosphates at Saudi Arabian Mining. The partners will initially marketammonia produced at the $5.5 billion facility before eventually usingthe feedstock to produce twice the amount of diammonium phosphate.Saudi Arabia is looking to expand fertilize production in order to meetrising food demand. Saudi Arabia will be able to produce about 18percent of the world’s diammonium phosphate once the Ras al-Zour plantis complete, Saudi Basic’s Al Sheaibi said yesterday. Saudi Basic,known as Sabic, will market most products from the plant for its firstfive years. Ma’aden will own a 70 percent stake in the Ras al Zourplant with Sabic holding the rest. Ma’aden will supply minerals fromthe kingdom’s interior.
Syria and India have signed a memo of understanding to develop thefertilizer industry in Syria in order to produce phosphoric acid andphosphate fertilizers to cover the needs of both the Syrian and theIndian markets. According to the memo, the two sides will promotemulti-benefit projects according to their feasibility study. The twosides also agreed on signing an executive program to produce phosphoricacid and phosphate fertilizers in Syria. They also agreed onestablishing factories for producing phosphoric acid in Syria with thepossibility of selling the surplus to the Indian side at global price.The Syrian Minister of Petroleum and Mineral Resources Sufian Allaopointed out that the memo aims at increasing the amount of the producedphosphate in Syria to reach 10 million tons per year, saying “theproduction is currently at 4 million tonnes. Syria has large reservesof phosphate, about 1.8 billion tonnes, the reserves amount can also beincreased with intensified exploration operations.” The cost of theproject is estimated at US$15 million, funded by the Indian companyZuari, which is in charge of the project.
Company News
Potash and phosphate producer, The Mosaic Company (NYSE:MOS)yesterday announced financial results for the company’s 2011 fiscalfirst quarter, which ended August 31. North America’s second-largestfertilizer producer, said net income nearly tripled to $297.7 million,or
.67 per share, compared to $100.6 million, or
.23 per share, inthe same quarter last year. Sales increased 50 percent to $2.19billion, from $1.46 billion for the year on year period. Mosaic alsosaid its gross margin as a percent of net sales came in at 23 percent,compared to 15 percent in the prior year.
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