April 25, 2012
Credit Suisse slashes estimates for potash prices
Potash groups'' hopes of a revival in potash demand have been questioned by Credit Suisse by estimating a fall in world shipments this year and slashing price estimates.
The bank warned that it was "now sceptical over whether potash prices can regain the momentum seen last year".
Indeed, a "sharp" rebound in volumes, fostered by unexpectedly prompt deals to supply China, the top importer, look set to peter out.
"We believe that volumes could weaken again in the second half [of 2012]," Credit Suisse said, forecasting a fall to 52-53 million tonnes in world shipments this year, below last year''s 55 million tonnes.
The figure is also below the 56-58 million tonnes forecast two weeks ago by Uralkali, the Russian potash giant, and an estimate of "up to" 58 million tonnes from K+S, its German rival.
Credit Suisse''s forecast reflected an observation that "distributors remain extremely cautious, given the uncertain grain price outlook, and are looking to defer new purchases until there is greater clarity around the US crop size and grain prices".
Fertiliser prices often move in line with grain values, which determine farmers'' returns and thus their willingness to splash out on products, such as nutrients, to raise yields.
Chicago corn futures are, at US$5.38 a bushel on Monday for December delivery, factoring in lower prices than the US$6.00-6.40 a bushel US growers are expected to receive for their last harvest, according to Washington estimates.
The bank forecast that "good industry discipline", besides the impact of maintenance closures in the July-September quarter, would keep the market "balanced", and "limit downside risk" to potash prices.
Nonetheless, unless a supply shock kicks in the "upside" for values "may be limited" too, Credit Suisse said, cutting price forecasts - particularly for the US Midwest market, where potash would average US$535 a tonne this year, US$40 a tonne lower than previously expected, and US$530 a tonne in 2013, a downgrade of US$80 a tonne.
Conversely, the bank raised its forecast for world urea prices this year, after an early US sowing season caught unaware distributors who had delayed restocking of the nitrogen-based nutrient.
"Over the past two months, US Gulf urea prices surged from the high US$300s a short tonne to over US$700 a short tonne," Credit Suisse said, also noting smaller price rises in other markets.
"Supply outages and the early planting season had distributors and traders scrambling to cover their short positions."
The bank kept unchanged its forecasts for phosphate prices, which foresee small declines in values ahead.