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【出版时间及名称】：2010年4月全球钾肥行业研究报告
【作者】：CORMARK证券
【文件格式】：pdf
【页数】：52
【目录或简介】：
Investment Highlights
Page 1
We prefer greenfield projects with strategic merit and
manageable financing risk. We also prefer niche specialty
fertilizers where unique cost advantages provide outsized
returns sufficient to attract financial or strategic capital.
The Global Potash Industry
Page 3
Demand is recovering but only the most strategic
greenfield projects will be built.
Allana Potash Corp.
Page 15
A highly strategic asset with low-cost production potential
and the lowest financing risk in the sector.
IC Potash Corp.
Page 26
Potential to become one of the very few primary SOP
producers in the world.
When global soft commodity prices spiked in 2007, fertilizer demand peaked as well
driving Muriate of Potash (MOP) prices close to US$900/MT. The global recession
coupled with high inventories and record high pricing however drove a buyers strike in
2009 sending demand down ~40%. In response, potash producers aggressively cut
production in 2009, operating at 50% of nameplate capacity. Still the MOP price dropped
60%, bottoming at its current low of ~US$350.
Undeterred by these market dynamics, existing producers continue to allocate significant
capital to brownfield expansions. Almost every major potash producer plans capacity
increases over the coming years with the expectation to grow capacity by ~20MM MT to
80MM MT by 2020 – a 30% increase. In addition, a plethora of greenfield potash
projects emerged through the recent boom – there were two times more exploration
permits granted in Saskatchewan in 2008, than in the previous 20 years combined. BHP
Billiton has also emerged as a serious threat to supply, with articulated plans to spend
$10B to add 10 MM incremental MTs over the coming 10 years. Regardless of whether
BHP does indeed execute this strategy, the threat will likely serve as an ongoing
overhang. Given the aggressive drop in demand, the significant brownfield supply
coming on line, and BHP’s articulated plans, the vast majority of these upstart greenfield
projects will never see production.
Our expectation is for demand recovery through 2010 and 2011. Already we are seeing a
return to normal buying patterns in India and China, and a gradual recovery in demand in
North America. Inventories are well below five-year averages and potash prices have
bottomed. Grain and oilseed demand continue their steady growth, and fertilizer demand
should regain this similar trajectory – world food supply simply cannot go an extended
period with below normal potash applications. Our expectation is for demand to reach
2007 levels by 2011 and grow 4% thereafter. In response to recovering demand, we
assume that 80% of brownfield expansions are developed. In this supply/demand
scenario, we see a requirement for limited greenfield development by 2018. Should
demand take longer to materialize, greenfield project timelines will be delayed further.
Based on our view that only the most strategic and economic greenfield projects will
ultimately get developed over the longer term, the potash price will need to gravitate to a
level that makes these projects economic. We believe that at $475, the best greenfield
projects will provide a 35% return to investors at current equity valuations.
Considering the supply/demand dynamics discussed above, the significant time to
development associated with these projects, and the large amount of capital required, we
prefer greenfield projects that require less capital or that appeal to deep pocketed strategic
investors focused on sourcing supply. We also prefer niche areas of the potash market
where unique cost advantages provide outsized returns sufficient to attract capital from
financial and strategic players. By focusing on this thesis, much of the debate around
BHP’s involvement, MOP supply/demand and/or financing risk is muted.
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