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Phosphate price downturn nearing its end, says Mosaic

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The slump in phosphate prices is nearing its end, Mosaic said, even as it announced a further move to cut its production of the nutrient “to tighten and balance the market”.

 

The US-based group, with 16m tonnes capacity the world’s second-ranked phosphate group after Morocco’s OCP, estimated the net price of the nutrient - as measured by the value of benchmark product diammonium phosphate (DAP) minus costs of raw materials - at some $240 a tonne.

 

That represents a drop of one-third from the latest high, reached in summer 2018, but has taken the net price to levels which have represented floors before, as in late 2016, as producer margins are squeezed.

 

Indeed, “at current prices, global phosphate producers are stressed”, Mosaic said.

 

“We believe producers in the top half of the cost curve are under significant stress.”

 

The group added that it saw world phosphate prices “at or very close to, the bottom”.

 

‘Support seasonal demand’

The comments tally with those of Russian rival PhosAgro, which said two weeks ago that “phosphate-based fertilizer prices are expected to stabilise in the medium term, followed by a gradual recovery”.

 

The revival would be driven by factors including seasonal upticks in fertilizer demand in Europe and North America, as nutrients are provided to winter crops, and the maintenance of Indian nutrient subsidies at year-ago levels.

 

“The high margin for [Indian] DAP importers will help to support seasonal demand, despite high inventory levels,” PhosAgro said.

 

It also cited “the intention of major Chinese producers to decrease DAP production by 0.8m-1.0m tonnes per quarter in the coming periods in order to support prices”.

 

‘Excess imports’

Many commentators have seen Chinese phosphate exports as heaping pressure on the world market.

 

Joc O’Rourke, the Mosaic chief executive, noting that “phosphate prices have declined further through the summer”, flagged “excess imports continuing to enter the US on top of high channel inventories”.

 

However, the group, fresh from closing its Plant City phosphates site in Florida, revealed that it would as of next month idle its Louisiana phosphate operations “to tighten supply and rebalance the market”.

 

The temporary closure will reduce the group’s phosphates output this year by some 500,000 tonnes, and is “expected to accelerate the reduction of high phosphate fertiliser inventories.”

 

Mosaic said it "expects a more balanced global suppy-and-demand picture to emerge in 2020".

 

Share buyback

The move follows too the temporary shutdown of potash production at Mosaic’s Colonsay mine in Saskatchewan, Canada.

 

And it came as Mosaic announced too a $250m share buyback, under a scheme which has a further $600m in authorised purchases.

 

The group also revealed that its purchase of Vale Fertilizantes was on track to meet or exceed its target of $275m in synergies this year, with a further $200m in “annual value” to be created “through ongoing business transformation efforts by the end of 2022”.

 

Mosaic shares stood up 4.2% at $21.03 in lunchtime deals in New York.

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