China's agreement to buy potash from Canadian and Russian suppliers, plus the growing chances of a reformation of the BPC cartel, have lifted prospects for a revival in prices of the nutrient, Raymond James and TD Securities said.
But analysts at rival Barclays are not so sure, cutting their forecasts for shares in Mosaic, the US-based potash and phosphates giant.
Raymond James - raising its forecast for New York-listed shares in Canada-based potash group PotashCorp by $7 to $37, and lifting its guidance to "outperform" from "perform" – said that the "principal factors" behind "malicious conditions" in the potash market "are now poised to fade".
The agreement by Canpotex, the North American potash cartel, at the weekend to provide 700,000 tonnes to Chinese buyers, which signed a similar deal with Russia's Uralkali earlier this month, should mark the bottom of the market.
"With a firm floor price now established, we expect sidelined buyers to promptly re-enter the market, providing a firmer bid and more accurate price discovery," Raymond James analyst Steve Hansen said.
Potash prices have tumbled from some $400 a tonne to levels near $300 a tonne since Uralkali in July broke-up the BPC marketing consortium, which had controlled more than 40% of world trade.
Chinese potash buyers, which agreed to pay $305 a tonne to Uralkali and are believed to have sealed a similar price with Canpotex, typically enjoy the lowest prices, as the world's biggest importers.
TD Securities analyst Greg Barnes said that "there is hope that with the Chinese benchmark price now established, a price bottom has been set for potash".
Raymond James also said that the rift between Uralkali and its former BPC cartel partner, Belarus-based Belaruskali, was "mending", a factor which would restore price discipline and imply stronger values.
"Strong overtures by Uralkali, Belaruskali, and their respective governments suggest that all parties seem intent on resurrecting their former marketing alliance," Mr Hansen said, basing this analysis in part of signs of rapprochement between Moscow and Minsk, which were sourced by the BPC beak-up.
Besides Russia handing Belarus a $2bn bail-out loan, Russia's ambassador to Minsk has highlighted that the two countries are working hard to bolster ties.
Mr Hansen also noted that Uralkali, which since quitting BPC has espoused maximising sales volumes, reportedly "reined in Chinese-bound rail [potash] exports through early December in order to bolster spot prices during the company's Chinese contract negotiations".
Such a move "arguably contradicts the firm's former 'volume-over-price' strategy", he said, forecasting Vancouver potash prices recovering from $305 a tonne in the current quarter to $330 a tonne for the October-to-December period.
However, Barclays, cutting its rating on Mosaic shares to "equal weight" from "overweight", struck a more cautious note, saying it was awaiting evidence that lower prices would improve underlying demand.
"Valuation multiples of potash producers [Intrepid Potash, Mosaic and PotashCorp] appear to be pricing in anticipation that volumes and prices are likely to improve after the recent $305 a tonne 'floor' set by the Uralkali/China contract," the bank said.
"We remain more sceptical until we see more tangible evidence that the need for restocking plus price actual elasticity will lead to a more than just a bounce back to prior demand levels."