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World potash shipments to hit record, despite North American retreat, says Nutrien

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Nutrien put another world potash demand record on the cards for 2018, despite a decline in the home North American market, as the fertilizer giant unveiled earnings forecasts for its first full year in existence.

 

The Canada-based group, formed by the $32bn merger of Agrium and PotashCorp, said that world potash demand this year will at least match the 64m tonnes achieved in 2017, and potentially reach 66m tonnes.

 

“Demand will continue to be robust in 2018,” Nutrien said.

 

The forecast came despite expectations that North American deliveries will ease to 9.5m-10.0m tonnes from the 10.2m tonnes achieved last year, and remain well below the all-time high for the region of 11.1m tonnes achieved 21 years ago.

 

While North American potash rates in the importing spring application season “are expected to remain normal supported by good affordability… we anticipate shipments similar to the historical average but slightly below 2017”, the group said.

 

The forecast reflected an assessment that US farmers will make “minimal shifts in crop area” this year, given that “major US crop prices are currently similar to year-ago levels”.

 

‘Continued demand growth’

 

In South America too, a forecast for volumes of 12.0m-12.5m tonnes this year showed potential for a fall in shipments from the 12.2m tonnes recorded in 2017.

 

While Brazilian potash inventories “ended the year at historically low levels, indicating robust consumption and supportive of strong import demand in 2018”, there remain doubts over the extent of sowings of safrinha corn, in the face of weak prices and delays to the soybean harvest, leaving land tied-up with standing crop.

 

In Mato Grosso, Brazil’s top safrinha corn state, the Institute of Agricultural Economics (Imea) has forecast a 9% decrease in plantings.

 

However, Nutrien forecast growth in the key Chinese markets, to 15.5m-16.0m tonnes from 15.1m tonnes in 2017, with indian shipments to at least match last year’s 4.5m-tonne figure.

 

“We expect continued demand growth in China and India in 2018 but at a slower pace than 2017 levels,” the group said.

 

‘Modest price increases ahead’

 

The comments come amid a gentle recovery in potash prices from 2016 lows, with broker Raymond James on Monday reporting US Midwest values at $265 a tonne, and market expectations of “modest price increases into the spring”.

 

US prices of diammonium phosphate (Dap), the benchmark phosphate fertilizer, stood at $395 a tonne, “on limited trading activity”, the broker said.

 

“Prices are underpinned by continued supply tightness,” Raymond James said, although adding that Mosaic “did not find any buyers” after raising its export offer by $10 a tonne.

 

Chinese export slump

 

In the nitrogen complex, urea prices rose by 2.9% week on week to $274 a tonne, the broker said, flagging “domestic production disruptions”, with reports of “operational issues” at a Koch plant in Oklahoma and a Nutrien site in Texas.

 

Nutrien flagged the support to urea prices from reduced exports from China, where the industry operating rate has fallen to an estimated 49%, from a high of 77% in 2013, in the face of high values of anthracite coal, the key energy source for what is a power-intensive manufacturing process.

 

Anthracite coal was currently priced at $205 a tonne in China, up from an average of $149 a tonne last year, and $106 a tonne in 2016.

 

The group forecast Chinese urea exports this year at 3.0m-4.0m tonnes, down from last year’s 4.7m tones, and well below the 2015 high of 13.8m tonnes.

 

Earnings forecast

 

The comments came as Nutrien forecast achieving earnings per share from continuing operations of $2.40 in 2018, its first full year of operation, guidance bang in line with the figure analysts are expecting.

 

Earnings before interest, tax, depreciation and amortisation (ebitda) was seen coming in at $3.2bn-3.7bn.

 

For the October-to-December period, Nutrien said that Agrium achieved earnings of $18m, equivalent to $0.13 per share, and down from $67m a year before, on sales up 9.5% at $2.45bn.

 

PotashCorp reported a net loss from continuing operations of $120m, or $0.14 per share, compared with earnings of $13m a year earlier. Revenues rose 2% to $1.08bn.

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