Fertilizer industry still faces price pressures and risks

The US “The Wall Street Journal” reported on August 5th that the fertilizer stocks had recently been severely sold off, but with China’s increasing demand for its population, this area may have bright prospects. In spite of this, the fertilizer industry still faces price pressures and risks.

Many fertilizer company stocks were hit hard last week after Russian fertilizer manufacturer Uralkali said that it will withdraw its sales cooperation with Belarus and stop selling products through the Belarusian potash company because of differences in sales requirements. Some people compared this move to the end of a global monopoly in the potash market. Uralkali said that it is expected that the increased competition will result in the price falling to 300 US dollars per ton at the end of this year, and the current price is about 400 US dollars per ton.

According to reports, this is a bad news, at least for some fertilizer manufacturers. However, Martin Hennecke, deputy director of the Hong Kong Bridgestone Group, pointed out that taking into account China's strong demand for chemical fertilizers, after the market digested Uralkali's recent news, potash prices may be supported.

Mitch Kasper, head of Midwest AG Investors, said that China will spend more than US$30 billion on farmland and agricultural assets this year, up from US$5 billion five years ago, and the spokesman of agricultural retailer Agrium Inc. Donnie Richard Downey stated that China is the world's largest consumer of crop fertilizers. He said that China’s demand for three fertilizers, nitrogen, phosphorus and potassium, has been growing and is expected to continue. China can achieve self-sufficiency in nitrogen and phosphorus fertilizers, but it still needs large quantities of imported potassium.

However, despite this, the fertilizer industry still faces price pressures and risks. Colin Cieszynski, Senior Market Analyst at CMC Markets, said that the price of fertilizer producers has traditionally followed the price of bulk agricultural products, but it has lagged behind. This may mean that fertilizer demand will decline in the next crop harvest season. In addition, the inventory of fertilizers is also increasing. Analysts from Rabobank said that there are more and more indications that potash sales in 2013 will be disappointing.