"1. Potash is not traded in any exchange - so there is no investment premium being priced into the value unlike oil or gold.
2. Long term potash demand remains healthy
3. There are excess capacity - if everyone were to produce flat out and started a price war. K+S will be the first one to go. So Canoptex is unlikely react by starting a price war. Plus even if the Russian is bringing in 3 mil tons to the market- thats only 6-7% of the world annual demand. And that's even if they are capable.
4. The move is more political and economical. Its Russian vs Belarus. Plus lower potash price lead to some increase demand from EM farmers - which offset some of the price declined.
5. BHP and other new market entrants will have to be put on hold - limiting possibility of future price wars.
Net-net I think this is good for potash producers in the long run."
2. Long term potash demand remains healthy
3. There are excess capacity - if everyone were to produce flat out and started a price war. K+S will be the first one to go. So Canoptex is unlikely react by starting a price war. Plus even if the Russian is bringing in 3 mil tons to the market- thats only 6-7% of the world annual demand. And that's even if they are capable.
4. The move is more political and economical. Its Russian vs Belarus. Plus lower potash price lead to some increase demand from EM farmers - which offset some of the price declined.
5. BHP and other new market entrants will have to be put on hold - limiting possibility of future price wars.
Net-net I think this is good for potash producers in the long run."
"Put it this way. It would be impossible for the NA producers to compete with the Russians after factored in the transportation cost. The NA producers would much preferred to sell to NA farmers anyway (less transport- higher price- fatter margin). But, as farmer, you would also want to diversify your supplier base - hence Canpotex will likely lose some market share in Asia but not as overblown as the story would have you believe. After all Uralkali only bringing in extra 3m tonnes to the market (if they are in even capable). They are out to screw Belarus (political move) and stop BHP from bringing Jensen online (economic)."
The more important takeaway from this story is still the same - is the long term demand for potash likely to grow?
P.S. I'm very afraid of the current population growth trend- if you look at the world population by numbers in a time-series for the last 50-100 years - its looking like a bubble forming"
The more important takeaway from this story is still the same - is the long term demand for potash likely to grow?
P.S. I'm very afraid of the current population growth trend- if you look at the world population by numbers in a time-series for the last 50-100 years - its looking like a bubble forming"
"IPI is the riskiest play as they are not part of Canpotex. And I believe their cost is on the high side. You want to stick with $POT because of its free cash flow as their cap-ex is whining down."
"The expectation is already there. Uralkali wants to sell to the Chinese and Indians at that price point. The price drop story is overblown as there is going to be offset in demand increase. Also the North American potash producers are selling more to North American farmers than to the Asians due to the transportation cost of postash. Uralkali want to price BHP out of their new project and take market shares from K+S and Belarus"
The only comment I want to add is that BHP's CEO seem to be not backing down from investing in a potash mine - it looks like he might be out to buy one of the potash producers ($IPI?) or continue to develop the Jensen project.
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