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Oversupply a worry in global potash sector (T.POT) (MOS) despite Uralkali deal

Stockhouse Editorial
1 Comment| November 19, 2013

The following is an excerpt from Canaccord Genuity’s Morning Coffee newsletter.

After months of reported talks, it was announced on Monday that billionaire Mikhail Prokhorov’s Onexim Group agreed to buy Kerimov’s 21.75% stake in Uralkali, the world’s biggest potash producer.

Onexim didn’t disclose the terms of the sale. However, The Wall Street Journal, citing a person familiar with the deal, reports the price was around $4 billion – that’s roughly a 14% premium to market prices.

Onexim said the deal would close soon since it didn’t require regulatory approval. While Uralkali’s ownership resolution is seen as constructive to some, Canaccord Genuity Ag analyst Keith Carpenter continues to see no change in the underlying oversupply problem in the potash market.

He continues to prefer the non-potash equities of Monsanto Co. (NSYE: MON, Stock Forum) and Agrium Inc. (TSX: T.AGU, Stock Forum) to the potash-weighted equities of Potash Corp. of Saskatchewan Inc. (TSX: T.POT, Stock Forum) (NYSE: POT, Stock Forum) and Mosaic Company (NYSE: MOS, Stock Forum).

Carpenter’s primary concern remains that the current oversupply in the potash market will worsen steadily through the rest of the decade.

The change in strategy by Uralkali this past July only exacerbated this problem. Market demand has not seen any growth since 2007 but supply expansion continues. Current demand is approximately 53 million tonnes, with operational capacity of about 67 million to 68 million tonnes today.

However, over the next eight years, Carpenter sees about 24 to 25 million tonnes of supply additions, all by companies with access to financing (either current producers expanding or other fertilizer producers entities adding potash).

This doesn’t take into account BHP Billiton Ltd. (NYSE: BHP, Stock Forum) possibly looking to bring on the world’s largest potash mine in 2020 (at 8 million to 10 million tonnes).

Carpenter says we have to assume that some of those new entrants will want to garner market share once their projects are on line, and thus he sees limited price escalation post 2015 as these come on line.


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This keith carpenter is obviously stupid enough to leave out the growth in demand, if he is forecasting no growth in potash demand for the next decade while population will nearly double then he is as stupid as his firm that forces him to write this junk. Most research are fact chasers and don't know anything.
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November 19, 2013
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