Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Credit Suisse cuts price hopes for fertilizer shares

Twitter Linkedin eCard

Credit Suisse cut price targets for shares in some of the world's top fertilizer companies, reflecting a weakened outlook for fertilizer markets, with potash values set to keep falling for at least the next three years.

The bank cut its hopes for shares in groups including Russia's Uralkali and Israel-based ICL, citing a "perfect storm" in the sector, which would see volatility in fertilizer prices continue.

The downgrades followed cuts by Credit Suisse to its outlook for fertilizer prices, with values of urea now seen averaging $221 a tonne in the key Yuznhy market, down from $273 a tonne last year, and phosphate prices averaging $371 a tonne in the US port of Tampa, down from $459 a tonne last year.

Potash prices will average $228 a tonne in Brazil, down nearly $100 a tonne year on year.

'Rally unjustified'

Indeed a "mini rally" in shares in potash groups "appears entirely unjustified", the bank said in a briefing last week, warning that stocks of the nutrient in key importers China and India were "nothing short of excessive".

Chinese port stocks, at a little under 3m tonnes, are up 115% year on year, the bank said, forecasting that this bodes will for the forthcoming annual, and influential, pricing round between the country, the top importer, and Canadian and former Soviet Union exporters.

The doubling in China's inventories "will further deter importers to sign anywhere higher than $250 a tonne".

Credit Suisse estimated stocks in India, the second-ranked potash importer, at a little under 2m tonnes, and that the country would pay $275 in its annual pricing deal.

Phosphates vs potash

Urea prices were seen remaining "volatile," as the weaker yuan supports exporter margins in China.

But the picture was not uniformly bad, with phosphates seen offering some stronger fundamentals.

"We think recent fertilizer prices weakness is to a large extent seasonally driven and fertilizer prices should start picking up within a month as demand returns," Credit Suisse said.

"In the medium term we continue to favour phosphates over potash due to relatively good supply discipline and limited capacity additions," Credit Suisse said.

Share price outlooks

The bank, in its share price outlook downgrades, made its deepest cut to stock in Russia's Acron, lowering the price target to 4,700 roubles, from 5,619 roubles.

This still remains well above the current share price, currently trading in Moscow at 3,590 roubles in afternoon deals on Friday.

Credit Suisse said due to cash inflows from a new ammonia plant "we expect Acron to use this opportunity to pay generous dividends".

The bank kept a "buy" rating on PhosAgro stock, despite trimming $0.02 from its share price target, taking it $14.00, compared to a current price of $11.88 in London.

Credit Suisse said there was a "good chance" that Acron and PhosAgro would deliver dividend returns of 10% or more to shareholders.

The bank also lowered its price targets for ICL, and Uralkali, maintaining a "neutral" outlook on those shares.


Twitter Linkedin eCard
Related Stories

Will protein prices fight back against fat in dairy markets?

Prices of fats remain elevated against protein values in dairy - at a time when the opposite is true in markets for oilseed products

World phosphate, potash shipments to grow in 2018, helped by Chinese needs

Mosaic forecasts further demand expansion, as it heralds a "transformational year" for its own fortunes, after a 2017 marred by a one-time tax charge

Deere lifts sales hopes - even as it unveils biggest loss in 25 years

The maker of John Deere tractors flags "strengthening" market conditions, but swallows a huge writedown prompted by US tax retorms

Plant Impact agrees takeover by Croda, after failure of Bayer contract

The crop enhancement group, floored by the failure of a supply deal with Bayer, agrees a takeover by a maker of chemicals from anti-wrinkle creams to floor coatings
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069