PhosAgro warned against expecting a retreat in
phosphate values to gain legs, flagging support to values from Chinese
capacity cuts, but acknowledged the dent to prospects for price rise from output increases elsewhere.
The Russian-based fertilizer group, which is one of the
world's largest producers of raw material phosphate rock, acknowledged a market
retreat from spring highs of $375 a tonne for the key Dap product in the key US
Dap was this week trading at $355 a tonne in Tampa, down $5
week on week, according to analysts at Raymond James.
"We currently see some seasonal softening after the end of
the spring season in Europe and North America, and higher export potential from
China," said Andrey Guryev, the PhosAgro chief executive.
'Better stability in
However, the pressure from a seasonal uptick in Chinese
export supplies was likely to be curtailed by the knock-on effects of capacity
cuts in the country.
"Industry consolidation and rationalisation in the country,
coupled with production and export curtailments, is likely to provide better
stability in prices," Mr Guryev said.
Nonetheless, he cautioned too against foreseeing a rise in
values ahead, given the prospect of extra capacity coming online in Morocco and
Saudi Arabia, which "may have a limiting factor for any significant price
'Exports to fall'
The comments tally with those of US phosphates giant Mosaic,
which has forecast capacity increases ahead of 2m tonnes in Morocco, plus 3m
tonnes in Saudi Arabia through the group's joint venture with local operators Saudi
Arabian Mining and Saudi Basic Industries.
The Saudi joint venture will probably produce some
300,000-500,000 tonnes this year, Mosaic told investors earlier this month.
Like PhosAgro, Mosaic also forecast a drop in Chinese
exports, to about 8.0m tonnes this year, from 9.5m tonnes in 2016 and 11.6m
tonnes in 2015, thanks to production curbs.
"With economic and environmental pressures mounting on
Chinese producers, we expect their exports to fall," James O'Rourke, the Mosaic
Rouble vs dollar
PhosAgro issued its comments as it reported a 46% slump to 12.26bn
roubles ($208m) in earnings for the January-to-March quarter.
While sales of major products rose by volume, growng 9.2% to
1.54m tonnes for phosphate-based products, revenues dropped by 21% to 44.40bn
roubles, undermined by the strengthening of the currency.
"As a company with mostly dollar-linked sales and rouble-based
costs, PhosAgro felt a significant effect from the sharp year-on-year
appreciation of the rouble against other currencies, which offset the recent
recovery in prices," Mr Guryev said.
"In these circumstances, we remain focused on cost
efficiency in order to mitigate the negative impact from foreign exchange
PhosAgro shares stood 1.1% higher at 2,416 roubles in late
deals in Moscow.