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The Financial Post reported that analysts at Macquarie Group expect potash prices to continue on a downward spiral, adding to an already multi-year low.
The Financial Post reported that analysts at Macquarie Group expect potash prices to continue on a downward spiral, adding to an already multi-year low.
As quoted in the market news:
Analyst Daryna Kovalska is calling for an average potash price of just US$254 a tonne next year, down from more than US$300 today, citing ongoing weakness in agricultural commodities and depreciating currencies in emerging markets.
Kovalska expects global potash demand to fall by 4.4 million tonnes in 2016, with the biggest declines coming in Southeast Asia, India and Brazil. And with China sitting on huge potash stocks, she thinks the balance of pricing power will shift towards the buyers and away from the sellers. That could lead to the collapse of the potash contract pricing system.
Kovalska also pointed out that in a “post cartel” world, the producers lack the discipline to reduce supply enough to bring it in line with demand. She noted prices are still well above the cost curve, so the incentive to cut supply is not there.
“The outlook for the potash market remains very pessimistic,” she said.
That has major negative implications for Saskatoon-based Potash Corp. Daniel Greenspan, another Macquarie analyst, downgraded the stock to underperform from neutral, and slashed his price target by 31 per cent to US$22 a share.