Revitalized North American phosphate fertilizer demand has driven fertilizer company profits higher in the first quarter of 2012 despite higher production costs and lower fertilizer prices.
By James Wellstead — Exclusive to Potash Investing News
A slow and steady recovery in phosphate markets has kept prices trading in a higher range in recent weeks, with 70-72% BPL Moroccan FOB phosphate steady around the US $200/tonne price. Fertilizer demand from North American markets has provided new support for higher prices while driving Q1 profitability for a number of firms.
Despite the rising cost of doing business, strong demand and rising farm profits in North America have given phosphate markets enough support to boost previously lagging spring and summer fertilizer buying numbers as well as companies’ bottom lines.
Recent Q1 2012 reports have shown that fertilizer and agri-industrial companies, especially those focused on North American markets, have been achieving higher phosphate ore and fertilizer prices.
CF Industries Holdings Inc. (NYSE:CF) recently released its Q1 report, which shows higher phosphate sales in 2012 than in the previous year’s first quarter, up 76,000 tons to 516,000 tons. But higher production costs and lower average selling prices – a common trend across the industry – pushed gross margins lower for the quarter.
CF Industries’ Florida-based diammonium and monoammonium phosphate fertilizers traded lower in the first quarter compared to 2011, averaging US $494/ton and $506/ton respectively, continuing the downward trend in prices seen since the beginning of 2011.
The recent glut in phosphate fertilizers in North American markets has driven prices down over the past year; prices were depressed even further by subdued planting expectations at the beginning of the year. But recent adverse weather conditions in South America and Europe have sparked the sales figures of fertilizer producers and marketers as North American markets have eagerly taken up the challenge of filling the gap left by lowered production in the corn and soybean markets.
Mosaic (NYSE:MOS), the world’s largest producer of phosphate, has gained from the North American revival, reporting that a “rapid acceleration” in both potash and phosphate demand this spring will translate into sales volumes at the high end of its previously announced guidance.
Mosaic’s President and CEO, Jim Prokopanko, pinned the revised projections on a spike in global demand for crop nutrients “driven by an early and strong spring season in North America, combined with increasing shipments to South America.”
Junior mining news
Stonegate Agricom Ltd. (TSX:ST) recently released further assay results, updating its knowledge of the Upper Phosphate Zone (UPZ) at its Paris Hills phosphate project in Idaho. The figures build on previous drilling in the UPZ area and show grades ranging from 20.37 to 29.35 percent P2O5 in thicknesses of 2.5 to 5.0 meters.
President and CEO Mark Ashcroft said that “[d]rilling will continue into the summer months in northern areas of the property and the Company expects to release a NI 43-101 compliant estimate of UPZ Mineral Resources in the second half of 2012.”
Continued work will support an update of mineral resource and mineral reserve estimates and will allow the company to complete a bankable feasibility study for the Lower Phosphate Zone by the end of 2012.
MBAC Fertilizer Corp. (TSX:MBC) released the results of the prefeasibility study for its Santana phosphate project, which is located in the southeast of Para State, Brazil. The report has pegged the net present value of the project at US $407 million (at a ten percent discount rate) with an estimated production of 500,000 tonnes/year of single superphosphate (SSP). Production is expected to start in Q1 of 2015 using 300,000 tonnes of P2O5 concentrate grading 34 percent.
The life of the mine is projected to be 30 years, with an average grade of 12.1 percent P2O5 and an initial estimated SSP selling price of US $349/tonne in 2015. The prefeasibility study also notes that there is significant resource expansion potential with a variety of opportunities for other higher-content phosphate fertilizers available for the company.
Securities Disclosure: I, James Wellstead, hold no direct investment interest in any company or resource mentioned in this article