Financial Overview and Market Expectations
Recently, Canadian potash company Nutrien and U.S. company Mosaic released their financial reports for the second quarter of 2024. Although both companies are facing performance pressure due to declining potash prices, the outlook for the global potash market remains optimistic, driven by steady demand growth amid improving agricultural fundamentals. Nutrien reported a net income of $557 million for the first half of 2024, but its adjusted EBITDA for the potash segment dropped to $1 billion due to lower sales prices. However, with record sales volumes and expectations of strong demand in the second half of the year, the company has raised its full-year potash sales guidance.
Nutrien's Market Outlook
Nutrien expects that despite pressure on crop prices, demand for crop inputs in North America will remain strong in the third quarter of 2024. Brazil's soybean planting area is expected to increase by 1% to 3%, with fertilizer demand projected to reach 46 million tons, close to historical highs. Agricultural demand in Australia is also expected to be supportive. Additionally, large contracts signed with China and India are anticipated to drive potash market demand in the second half of the year.
Mosaic's Market Outlook
Mosaic achieved $5.5 billion in revenue for the first half of 2024, a 27% year-on-year decline. Despite the drop in potash sales revenue, the company remains optimistic about future market prospects, predicting that low global grain and oilseed inventories will continue to stimulate agricultural production, thereby driving potash demand. Mosaic forecasts that global potash shipments will reach 70 to 73 million tons in 2024 and believes that recent large contract signings with China and India will boost demand across Asia.
Supply-Side Challenges and Rising Costs
Mosaic noted that to address production challenges, the company has restarted the Colonsay mine, though this move is expected to negatively impact overall production costs for the year. At the same time, Nutrien and Russia's Uralkali are also experiencing rising sales costs. Global public health events, geopolitical fluctuations, and increased international transportation costs have all significantly impacted the cost curve for the potash industry, driving sales costs higher.
Establishing the Floor for Potash Prices
With Canada, Belarus, and Russia holding the majority of the world’s potash reserves, the rising supply costs faced by these potash giants have reinforced the floor price for potash. Coupled with increased transportation costs due to geopolitical factors and rising production costs, potash prices are expected to maintain a relatively stable upward trend in the future.
Conclusion
Despite short-term challenges, global potash giants remain confident in the market's future development. As agricultural fundamentals continue to improve and the global economy recovers, the demand for potash, as a key agricultural input, is expected to grow steadily, with market prices likely to rise gradually.
Attention: The above information is for commercial reference only due to the diversity of information collected, and Kelewell is not responsible for the authenticity of the data.
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