17 September 2013 22:07 [Source: ICIS news]
HOUSTON (ICIS)--Mosaic’s long-term outlook for the fertilizer industry remains positive, despite declining fundamentals for crop nutrients, CEO James Prokopanko said on Tuesday.
Demand has weakened in the short-term primarily, due to subsidy reductions from the government in India and the weakening of agricultural commodities from the record highs of 2012, Prokopanko said at the Credit Suisse 26th Annual Chemical and Ag Science Conference.
Prokopanko said the additions of new supplies from projects that are starting to come into the market and along with lower cost for feedstock materials, namely natural gas, have also factored into the recent decrease experienced in pricing.
He said the fluctuation in the fundamentals have been exacerbated by a strengthening US dollar against most currencies, especially the Indian rupee, causing increased pressure on dollar denominated deliver prices in several key markets for the fertilizer industry.
A lot of attention has been placed on the break-up of the Russian and Belarus trading venture, and Prokopanko believes the ambiguity related to the turmoil has spilled over into the other crop nutrients and are seen in a worse light as it has occurred during what is typically a seasonally slower period for producers.
“The net result is that distributors are cautious and have deferred purchases in the face of softer prices and several uncertainties. So in the near-term market, conditions have caused us to lower our price and volume guidance,” said Prokopanko.
“Delayed purchases are expected to compress movement this fall and likely test transportation and logistics capabilities. Prices for nearly all major plant nutrients have declined to their lowest levels in about three years, but we believe these factors point to a bottom.”
Looking ahead, Mosaic projects global shipments of phosphate will increase by 2.8% per year through the rest of the decade from 58.7m tons recorded in 2010 up to 77.8m tons in 2020. In terms of potash, that increase is estimated at a rate of 2.9% annual growth, from 52.6m tons in 2010 to 70.3m tons in 2020.
“Our conclusion is that they show a balanced and constructive fundamental outlook through the end of this decade,” Prokopanko said. “The old adage that the cure for low prices is low prices, and the cure for high prices is high prices applies in the global potash market.”
Commenting on the Uralkali exit from its trading venture with Belaruskali, Prokopanko said he was not sure if there would be a reunification of the partnership, but it is his sentiment that once the dispute is laid to rest, the end result will be that there was not much difference made in the fundamentals of the global potash market.
“I don’t think a volume over price strategy passes the economic sniff test. To use more of a non-renewable resource to bring it to market at a lower price [and] greater volume so that you earn less dollars, somebody has to come and explain and pencil out that math to me,” Prokopanko said.
“I think when the dust settles, and within a year, we are going to find that there isn’t much more potash sold, market shares haven’t changed appreciably, and somebody is going to have a lot of explaining to do.”
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