Potash Estimates Adjusted By Barclays On Nitrogen Market

The outlook for the US nitrogen market has deteriorated from the year-ago levels, which is evident from the roughly 45 percent y/y decline in urea prices to $183/t in New Orleans and to $210/t in the Midwest, Barclays’ Matthew J. Korn said in a report.

Merger Fallout Hits Estimates

“Pressure has come over the past several months from factors both local (the pending ramp-up of new U.S. capacity) and foreign (currency/coal price weakness shifting the Chinese cost curve lower), but it's been the recent unwinding of the expected CF/OCI combination that's caused us to revisit our near-term assumptions,” analyst Matthew CF Industries wrote.

Related Link: It's Okay To Hold POT Now, Vetr Top Raters Say</bzrelatedlink. In late May, US fertilizer maker CF Industries Holdings, Inc. CF and Netherlands-based fertilizers and industrial chemicals producer OCI NV called off their planned $8 billion merger.
CF Industries being a standalone, US-domiciled company is less able to influence the domestic nitrogen market.

Korn explained, “Folding Wever into its asset portfolio would have meant all incremental U.S. UAN production belonged to CF, and the combination of an expanded Donaldsonville facility with a tax-free trading company would have formed a low-cost, efficient export platform. Without these pieces in place to smooth the U. S. market's absorption of new ammonia, urea, and UAN capacity, we expect prices to remain weaker for longer.”

The maintained an Underweight rating for Potash Corporation of Saskatchewan (USA) POT, with a price target of $14. The EPS estimates for FY1 and FY2 have been reduced from $0.73 to $0.64 and from $0.90 to $0.84, respectively.