Mosaic downplayed prospects for further falls in potash and phosphate prices, saying that markets for both fertilizers faced “fundamental tightness” into next year, “and quite likely beyond”.
The North American fertilizer giant, which is the world’s largest producer of finished phosphate products, acknowledged the retreat in prices of both nutrients from their “spike” after Russia’s invasion of Ukraine raised a cloud over Black Sea supplies.
Prices of phosphate and potash have both plunged to some $600 per tonne in the Brazilian market, roughly half highs reached earlier in the year, with smaller declines in Asia and the US, Mosaic reported.
However, values now “appear to be searching for a new equilibrium”, which the group forecast “will be in line with the trend price gains since January 2020”, implying levels close to the current range.
‘Sentiment has improved significantly’
The forecast reflects an assessment that the price retreat, combined with continued firmness in crop prices, “justifies a return to normal nutrient applications” by farmers who scrimped on fertilizer use earlier in the year, leading to unexpected stockbuilds in some countries.
“In North America, sentiment has improved significantly from the spring season,” when wetness also hampered fieldwork and fertilizer applications.
“As a result, fall nutrient application rates are trending toward normal levels, and this is expected to deplete channel inventories,” Mosaic said.
Meanwhile in Brazil, fertilizer prices have “retreated to levels that are incenting in-country shipments, which are expected to pull year-end inventories down to levels comparable to last year”.
‘Fundamental tightness’
Mosaic trimmed forecasts for both world industry phosphate and potash use this year by 500,000 tonnes apiece at the middle of the forecast range, to 69m-71m tonnes and 60m-62m tonnes respectively.
However, it forecast marked recoveries in 2023, to a record 72m-76m tonnes for phosphate, and to 63m-66m tonnes for potash.
Nonetheless, for both nutrients “supply constraints remain”, with the potash market squeezed by a downturn in Belarus production estimated at 8m tonnes this year and with “very little recovery” expected in 2023.
In phosphates, China’s exports will fall by up to 5m tonnes this year, undermined by export curbs which “are expected to be extended into 2023”.
“Together, the fundamental tightness in global markets for both potash and phosphates is expected to persist well into 2023 and quite likely beyond.”
Below forecasts
The comments came even as Mosaic followed peers CF Industries and Nutrien in unveiling earnings shy of Wall Street expectations.
Although Mosaic’s earnings for the July-to-September quarter more doubled to $841.7m, on revenues up 56% at $5.35bn, underlying earnings per share, at $3.22, fell short of the $3.40-per-share figure investors had pencilled in.
While the group’s potash division more than tripled its operating profits, to $793m, thanks to higher volumes and prices, the phosphate result rose by only 6.7% to $222m, reflecting in part a 4% dip in production “as a result of plant turnarounds and the impact of Hurricane Ian”.
Phosphate sales volumes fell by 10%, to 1.7m tonnes.