Mosaic forecasts even higher potash shipments in 2017

02.11.2016

Mosaic forecast a "rebound" in world potash shipments next year, and a "positive demand outlook" sending phosphate industry sales to a record high, even as the fertilizer giant unveiled better-than-expected results.

The US-based group forecast that world potash volumes would in 2017 rise for the first time in three years, to 61m-63m tonnes, from 59.6m tonnes in 2016, driven by a quest for fresh supplies after a rundown in global stocks.

"Shipment growth is expected to benefit from what we believe will be a sizable pullback in channel inventories by the close of 2016," said Mosaic.

Asia growth

Shipments to Asia are expected to see particular growth – including in China, the top potash importer, where volumes will rise from 13.0m-13.3m tonnes this year to 13.7m-14.2m tonnes in 2017.

While Beijing is implementing measures to cut plantings of corn, a particularly fertilizer-hungry crop, Mosaic said that it did not believe the shake-up would have "material adverse impact on demand" next year.

In Indonesia and Malaysia, better fundamentals - namely, better rainfall, lower potassium prices and a strong rebound in palm oil prices will "begin driving a meaningful increase in 2017," according to the company.

Strong rebound in phosphates

Mosaic also forecast higher global shipments of phosphates, of which it is the top producer, with volumes next year to reach 66m-68m tonnes, up from 65.6m tonnes this year.

The group flagged a "positive demand outlook", notably in Latin America, where Brazil was seeing a "big demand pull" thanks to higher corn prices, while other countries in the region could see volumes hit 3.7m tonnes and take out a record set a decade ago.

"Higher local‐currency ag commodity prices and low fertilizer prices continue to fuel a strong rebound in demand," Mosaic said, also highlighting a switch by Argentine growers to corn.

"It is apparent that Argentina's decision not to lower their soybean export tariff next year is not having a deleterious impact on phosphate demand and has been offset by higher corn area."

Colonsay mine to reopen

Mosiac said that its temporarily halted potash mine at Colonsay, Saskatchewan may restart next year.

The company had stopped production at the mine in 2016 because of low global potash demand and weak prices.

However, as fertilizer demand looked strong for the spring planting season, the company said it would restart operations.

"We're believing it will probably be necessary for us to be starting up Colonsay in the early new year," said Joc O'Rourke, the Mosaic chief executive.

Profit beats estimates

Mosaic's profits easily beat estimates, as the company sold more potash than it had expected.

It attributed the higher sales to "solid on-farm demand, destocking of channel inventories and optimization of operations."

Mosaic sold 2.2m tonnes of potash in the three months ending September 30, compared with its estimates of 1.8m-2.1m tonnes. Last year, the company had sold 1.6m tonnes of potash in the same period.

The higher volumes offset somewhat the impact of a lower potash sales price, at $160 per tonne, compared with $265 per tonnes last year.

Fertilizer prices have been falling steeply on weaker currencies in importing countries such as Brazil and excessive supplies.


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