Potash price gains to stick despite corn's retreat

Intrepid Potash revealed a return to rising sales values for its potash, and forecast price increases would stick despite the tumble in grain markets, as the group unveiled a bigger-than-expected return to the black.

The US-based group unveiled earnings of $5.56m for the April-to-June period a figure which, while down 51% year on year, represented the first profits in three quarters.

The return to the black reflected in part efforts to cut costs, as Intrepid and other potash groups struggled against a market thrown into turmoil after Russia's Uralkali a year ago broke up the Belarusian Potash Company cartel, which controlled more than 40% of world trade.

The cartel's demise prompted a slump on potash prices, as buyers stood back, awaiting to see how far prices would fall.

However, Intrepid also noted a return to growth in prices it achieved for its potash, up 4% quarter on quarter to $363 per tonne, as demand swelled, although values remained well below the $443 a tonne it achieved in the same period of 2013.

Price outlook

"Potash demand in the second quarter remained strong and pricing improved in response to lower inventory levels in North America, particularly of granular sized product," Intrepid Potash said.

And customer demand has started "strong" in the July-too-September quarter too, raising the chances of price rises sticking despite the fall in corn prices to four-year lows, implying lower farmer returns.

"Intrepid does not expect potash pricing to fluctuate meaningfully during the second half of the year in response to current corn and soybean pricing as current potash pricing provides good value to the farmer," the group said.

Intrepid indeed highlighted the summer potash price rise, to $463 a tonne in the Midwest, by Canada's PotashCorp, as supporting "an outlook for stability in pricing into the fall season of 2014".

The comments also come two days after Urakali, nearly exactly a year after quitting the Belarusian Potash Company, said it may raise by 10% prices for a 2015 supply contract with China.

Prices agreed by China, as the top potash importer, tend to set the benchmark for other buyers.

Inventory drawdown

Intrepid reported sales of $110.9m for the April-to-June period, up 19.7% year on year, and ahead of market expectations of $91.0m.

Besides higher prices, the group also achieved above-forecast sales volumes of 235,000 tonnes.

Earnings, equivalent to $0.07 per share, beat forecasts of a $0.01-per-share result.

However, the stronger sales volumes, up 28% year on year, came with a hangover, in depleting inventories such that Intrepid lowered to 415,000-435,000 tonnes, from 420,000-440,000 tonnes, its forecast for volumes in the second half of 2014.

The group produced 411,000 tonnes of potash in the first half of the year 67,000 tonnes behind sales.

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