Sat, Sep 20, 2014, 4:23 PM EDT - U.S. Markets closed

Recent

% | $
Quotes you view appear here for quick access.

Potash Corp. of Saskatchewan, Inc. Message Board

  • abbaman7 abbaman7 Aug 10, 2013 8:40 AM Flag

    What All The Analysts Are Forgetting About Uralkali's Situation

    You can find articles all over the place telling you that because Uralkali is a low cost producer, even if prices fall big time but they can get a bump in volume, they should be able to make do. I say that is short sighted reasoning because of one thing: A significant portion of Uralkali's production remains in Russia where it is subject to very onerous price controls on which they either break even or lose money. The only money they make is from overseas sales. Which means they need to greater revenues from their exports in order to satisfy their creditors and cover the costs of the current expansion project. I still think it was a good idea for them to break with Belarus and the more we learn about that break up, the more likely the whole thing was orchestrated from the top of the Kremlin with strategic goals in mind.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I am always amazed by posts that hammer Uralkali's decision to abandon the potash cartel. Uralkali was failing under the cartel model....it was giving up market to POT and MOS in its backyard (China and India). It was losing money with its old marketing scheme (low volume and selling at high cartel prices). Prices were constrained in Russia and imports to China.India limited by cartel prices. Uralkali left the cartel for a good reason....it is the world's lowest cost ($80) producer with the largest potash supply in the world. It has very low transportation costs in selling to China given existing railroad lines between the two countries.

      Uralkali will become profitable by being the prime potash supplier to both China and India...period...whether it sells it at $220 or even $150. POT and MOS can't match those prices with their overseas shipping costs. Uralkali has the product and proximity to China to become a high volume/low cost producer. These guys are not idiots...it is the only play that makes sense for them (and for Russia).

      Russia is a natural resource driven market. Putin will do whatever is necessary to promote natural resource exports to China/India...large natural resource importers. If necessary, Putin will subsidized Uralkali production to wrap-up the Asian market. You saw a similar move earlier when a multi-billion dollar ngas contract was signed between Russia and China. The losers in this Russian natural resource gambit are Canada and to a lesser extent the U.S. You can ignore this fundamental shift in the potash market at your peril......we won't really see the outcome (potash prices) until further sales contracts are signed or renegotiated by China and India. With the demise of the cartel....you may see different prices for potash world-wide...similar to ngas and oil pricing.

      This is merely the beginning of a move by Putin to lock in markets close to home. Deal with it....it makes sense for Russia and Uralkali..

    • Everyone forget that Russia is a small part of their global business, not sure why people are so worried about Russia................... Media hype......

      Sentiment: Strong Buy

    • if they think they can keep up with the world's demand at a significant price cut, let them...i say let the big boys wait it out and see if they can maintain production to meet the demand at a significant price cut. it's like working double or triple for less pay.........can this one player meet production demand at half the price? let them try and i say let the other players let them. see how long it last.

    • Abba, that is a very good specific point. I would just add that on a more generic level... even the CEO pointed out that this is not the shoe business, volumes in ferts don't double if producers cut the price in half, that's a myth. All these analysts are putting their econ 101 hats on and doing all these bogus back of the envelope calculations and applying that to an industry they just don't understand. Doyle went on to point out that the Russian players just do not have much market share in North America, where Potash Corp does much of its business, they are rather "minor" players. Besides, in the end, we are talking about a bump up in global supply of about 2.5M tons, compared to 55M to 60M tons estimated (demand) and that is IF, if, Uralkali has their mines running at maximum, which is another speculative story. No one player in this industry can dictate the price, no matter how much they lower their prices. They just wind up hurting themselves, which shows this whole thing was political. It couldn't have been for the good of Uralkali stakeholders, because their stock has sold off big time since the speculative announcements from the Russian thug CEO. The market priced the worst case scenario from the news in the pre-market, all at once, for what COULD happen over the next 12 months, but probably will not happen. Billions upon billions of market cap lost in various fert companies globally based on one Russian thugs' say so and speculative musings. What a joke.

      • 1 Reply to kieser_report
      • Somebody should write a song entitled "Ramping Up Is Hard To Do." As we both know, right now what Uralkali is talking about is increasing their production as they switch over from a price strategy to a volume strategy. But that will take time, money and effort. And in the end, they will probably fail to get where they claiming their functional operational capacity will get to [which would probably take 8-12 months in any event] and the reason is because nobody operates at 100% of their operational capacity. Those with short memories may not recall what it was like some years back when, say, POT was on allocation. And they weren't at 100% of operational capacity at that time either. Once you get to around 95% of your operational capacity, you are about done. People are not machines and even though they work with machines they cannot simply function as machines even with the best of intentions and effort. And now I am talking about the Canadians. The Russians are another story and I just don't buy the notion that they can maintain production at the levels indicated by CEO Baumgarten unless they bring in slave labor. So, OK, there may be some increase in production which will probably get absorbed anyway assuming that CEO Doyle is right that we have just begun a multi-year ramp up in consumption after years of slow growth. And then let us not forget that by the end of 2015, Brazil loses the 600,000/MT they currently produce locally as their mining operation runs out of product with nothing on the horizon to replace it. The supply and demand situation may not turn out what many of the naysayers are predicting.

    • Good point my harmonizing musical friend.

    • Nyet!

 
POT
35.40+0.02(+0.06%)Sep 19 4:04 PMEDT

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.