EDIT @ 11:17 AM: A couple of readers have emailed me that the $576 does NOT include shipping so the true landed cost is $700 or so for China (which would be equivalent to the $625 Indian cost) - in English this means China is paying more than India - which is truly an amazing situation and my $500 pie in the sky forecast for China was actually surpassed by $76. Most people were thinking China would pay $400 - hence my $500 was very aggressive. And it came in at $576.
Either way it is a tremendous number as it would equate to $450 even if it does include shipping. My dream scenario was $500 as I outlined a few weeks ago [Mar 27: Canpotex Potash Contracts Secured with India @ $625]
The last frontier is China, and as I stated I'll be thrilled with even a $500 price point with the volume China will bring to the table.
Really there is not much more to add to this story from what I've been saying since day 1 in the blog; this is truly an amazing secular bull market, the likes of which I don't recall seeing - period. The intensity of the price increases have surpassed even my most rosy projections. And I don't yet see any slowdown ahead. Even if prices leveled off at these levels for years it would be a gold mine of profits.
- Chinese fertilizer importers agreed on Wednesday to pay more than triple what they did a year ago for potash imports. North American exporter Canpotex has agreed to sell potash in 2008 to Sinofert Holdings, the largest distributor of fertilizers in China, for $576 per tonne, a whopping $400 per tonne higher than the price it paid a year ago.
- Belarussian Potash Corp, the Russian counterpart of Canpotex, also agreed to raise prices to Chinese importers by $400 per tonne.
- Due to the timing of this settlement and demand in other markets, Canpotex has only 1 million tonnes to commit to Sinofert through the remainder of this year, Potash Corp said in a statement. "Significantly higher potash prices and extraordinarily tight supply have become much more firmly entrenched since China's previous contract was signed 14 months ago," Potash Corp Chief Executive Bill Doyle said in a statement.
- China, which is the world's largest importer of potash, usually buys the crop nutrient at a significant discount to other large importers like India and Brazil. But this year China lost some of its pricing leverage as Indian importers, who normally price potash contracts after China, jumped ahead of the queue due to tight global supplies of the crop nutrient.
5 comments:
Mark, Im mourning the loss of the capotex i sold yesterday. But the run-up in stock prices is just crazy. I am trying to weigh the risk:reward between selling more or holding. They arent up against any trendline resistance.. not for another 20 pts on MOS. So, Im trying to objectively review what upside there is in the short term. (1-3 months)
Are we going to see any more announced contract price increases for fertilizer?
Can there be any capacity increases from any of the major producers?
Will there be analyst upgrades?
My preliminary thoughts are (no, maybe, yes)
What other positives (negatives) can show up to drive prices higher in the near term?
I'd appreciate your thoughts.
The major countries are now accounted for
There is no spare capacity - that is what people don't get. You can't go an open a mine and bring more online; it takes years.
The question now is what is in the stocks and what is not.
There will be pullbacks along the way, but as I've stated each time these pullback you need to load up. And then sell into euphoria.
If you are a traditional investor the consensus view is simply put a trailing stop of say 7% below the closing price each day and let it ride. Lemmings can take names much farther than anyone imagines.
I'm being more conservative by taking out profits but once something gets on a roll it can go much farther than anyone imagines. Hence the trailing stop methodology.
My goals were $200 MOS and $250 POT in a year when the India news came out. POT isn't so far from that already. Quite amazing.
I decided to stay with my gameplan, which has served me well in the past. And it is not until we start to hear 'hiding in commodities' that I seriously want to cut exposure. That seemed to happen in Aug, Nov/Dec.. and is starting to play out again. The relative outperformance is pretty clear again. That being said, I still took a tiny bit off again today, bringing my down to 2/3 of a fully committed position (which for me, is viewed as extremely agressive). (note that I hate going below 1/2, because every time I get that low, I end up regretting it) But first of all, I'm a risk manager, and that trumps the speculative guessing game. So, discipline states to take some money and buy something nice with it.
I agree, there is no real spare capacity. Which is why when MOS increased their capacity numbers, it got that boost. So, im wondering if it was even possible for any other firms to expand, even slightly. This is more of a company by company assessment, rather than an industry view. Because MOS has already done so, and POT has that premium... that leaves AGU, which has ramped recently, more than others for reasons I am not quite sure of.
AGU is less of a pure play as they have a retail component. It has the lowest multiple for that reason, and is simply playing catch up. If you plot their charts AGU has been the laggard by a long shot.
Observe here
http://tinyurl.com/3qocbk
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