Houston, 16 July (Argus) — Mosaic expects potash and phosphate price weakness to persist near term, but recover over one to two years as rising sales volumes ultimately lead to a tighter market.
Despite demand disruptions from poor US weather and a faltering Indian market, the company sold a record amount of potash in its fourth fiscal 2013 quarter and maintained flat DAP volumes, according to an earnings call today. However, with global potash operating rates in the mid-80pc range and elevated DAP inventories, prices are expected to remain under pressure through the summer and fall.
Mosaic expects average plant potash prices for the quarter ending September 2013 to be $330-360/t fob ($299-327/st), down as much as 19pc from the fiscal fourth quarter's average selling price of $368/t. Perhaps a symptom of the global potash market's oversupply, these price reductions are forecast despite healthy expected volumes in the quarter, which the company guided as flat to up 17pc.
Potash operating rates will fall from 95pc in the fourth quarter to below 75pc in the quarter ending September 2013 as planned turnarounds and curtailments take production offline.
Mosaic estimates average plant DAP prices of $430-465/t fob ($390-421/st), down as much as 11pc from the fiscal fourth quarter's average selling price of $483/t. Phosphate segment volumes for the quarter ending September 2013 are forecast at 2.9m to 3.3mt, flat to 14pc higher than the same period last year.
Mosaic anticipates flat gross margins compared to last quarter at 17pc as the decline in finished product prices is offset by lower raw materials costs, namely ammonia and sulfur.
Mosaic affirmed its positive outlook for MicroEssentials (MES). MES, a product which fuses MAP with other nutrients in a single granule, set a sales record in the fiscal fourth quarter and grew 28pc year over year in 2013. The company said it cannot keep up with MES demand and will expand production.
For the fiscal year ended May 2013, Mosaic reported operating earnings of $2.2bn, down from $2.6bn a year ago. The decline was primarily caused by lower potash and phosphate realized prices partially offset by higher potash volumes.
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