Friday, July 10, 2009

Firesale reverberates among Potash stocks (POT)

AlphaNinja - Oh how the competitors must be seething. Russian potash producer Sivint really went all out to secure a contract to provide 850,000 tons to India -->> they agreed to a price of $460 per ton, while the other producers' bids were in the neighborhood of $625-635.

Whether that has "set the price" or is a fluke, the fertilizer stocks are getting slammed today. The prospect of such a drastic drop in pricing clearly spooking the market.

From briefing:

"This is a large volume contract between a major seller and large buyer, we thus believe this will establish the market floor price and set the range for Chinese buyers," said UBS analyst Brian MacArthur. The price of potash -a key crop nutrient- has remained stubbornly high even as demand has collapsed, as a small group of cos, which account for roughly 75% of global potash supply, have drastically cut production in a bid to maintain pricing. However, concerns arose that cash-strapped Silvinit might cave on pricing after the price it bid in the recent Indian tender was kept confidential, while the prices bid by other major suppliers were made public... "If Silvinit has indeed contracted with India at $460 delivered, other producers must now decide what to do with their own offer prices," said Morgan Stanley analyst Vincent Andrews...

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