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The gist of the Mosaic 8-k is that the phosphate price decline is now over and distributors have begun battling for marketing position;
“In the case of phosphate, the combination of continued strong end-user demand, a lean distribution pipeline and the cumulative impact of several small planned and unplanned production outages has tightened the global market and changed sentiment overnight. As a result, phosphate prices are staging a powerful and earlier-than-expected rally during what typically is a seasonally slow period.”
Phosphate: How Does This Knife Fight End?
The price of DAP loaded on a vessel at Tampa had surged to $475 per tonne during the last week of January, a 40% or $135 gain since the end of November. Tampa SWAP contracts for February, March and April were bid at $455 to $465 per tonne with offers at $465 to $470 at the end of January, indicating that prices likely would trade at these higher levels into the spring application season. The price of DAP loaded on a barge at New Orleans (NOLA) also had spiked to about $440 per ton, a 38% or $120 increase during the same period. NOLA SWAP contracts for February, March and April were bid at $430 per ton with offers just a few dollars higher.
Several factors typically combine to move markets by this much in such a short time. In this case, the combination of continued positive demand prospects, a lean distribution pipeline, the cumulative impact of several small planned and unplanned production outages, a spike in sulphur costs, and an increasing number of logistical problems has tightened the market and quickly changed sentiment. Many analysts point to the significant drop in phosphate prices following the fall application season, the sale of three U.S. panamax vessels to Chinese buyers and hints of several production outages as the events that changed expectations and triggered the early buying onslaught.
Despite somewhat less robust drivers, demand prospects continue to look positive. Global shipments of the leading phosphate products are forecast to climb to a record 64 to 66 million tonnes in 2014, up from our estimate of slightly more than 63 million in 2013. We also project that import demand for these products will rebound to a record 24 to 25 million tonnes this year, up from 22.5 million in 2013.
The demand outlook in the Americas remains outstanding. In Brazil, shipments continue to set new records. We estimate that total plant nutrient shipments increased to 31.3 million tonnes last year, up 6% from 2012. Shipments are projected to increase another 3% to more than 32 million tonnes in 2014. Imports of the leading phosphate products including MicroEssentials ® jumped to nearly 5.1 million tonnes in 2013, an increase of 36% or 1.4 million from 2012 and more than double the volume just five years ago. Imports are projected to stay at this lofty level in 2014. Both total shipments and phosphate imports mirror the increase in soybean production. Based on the latest CONAB estimates, Brazilian farmers are expected to harvest a record 90.3 million tonnes of soybeans this year, up 10% from the record last year and up more than 50% from the 2005-07 average.
In North America, shipments of the leading phosphate products climbed to a modern-era record of 10.1 million tons in 2012/13. We estimate that shipments will remain at elevated levels of 9.6 million tons in 2013/14 and 9.8 million in 2014/15. The seven-year Olympic average is 9.0 million tons. Shipments during the 2013 fall application season (Jul-Dec) were off about 11% from the record level a year earlier partly due to the later harvest, but movement still exceeded the seven-year Olympic average by 6%. We project that shipments during the spring application season (Jan-Jun) will equal the total last year and exceed the seven-year Olympic average by 6%.
Channel inventories in many countries were pulled down to low levels during the slow price burn of the last two years. India provides the best example. Our Delhi team estimates that destocking of wholesale and retail inventories likely will total about 2.4 million tonnes for the fertilizer year that ends March 31, 2014. As a result, we project that Indian DAP imports will rebound from an estimated 3.6 million tonnes this year to around 5.5 million tonnes in 2014/15. Indian buyers are not expected in the market until the second quarter, but the prospect of a nearly two million tonne rebound in imports is expected to keep fundamentals snug well into the second half of 2014.
On the supply side of the ledger, the cumulative impact of several small planned and unplanned outages has reduced nearby availability. For example, we took down the large No. 5 DAP granulation plant at our Riverview, FL complex for an extended turnaround at the end of November (or during what we expected to be a seasonally slow period!). Modifications will enable this unit to produce DAP, MAP or MicroEssentials ® once it is back online in early April.
The Ma’aden facility in Saudi Arabia also continues to ramp up at a slower-than-expected pace. Market publications have reported that the facility is operating at around 60% of capacity due to ongoing start-up issues at the mine, railroad and chemical plants. Finally, other planned and unplanned outages in Australia, Mexico, Tunisia and the United States as well as weather-related logistical disruptions in Morocco also have reduced or delayed shipments at a time when demand has perked up.
So, how will this knife fight end? Our assessment is that there is more upside than downside price risk in the near term given these recent developments as well as the prospect of continued tight fundamentals through the spring application season.
Chinese export economics, however, likely will set a ceiling later in 2014. China has lowered export taxes on nitrogen and phosphate products this year. In the case of DAP and MAP, the export tax during the peak domestic season was set at about $8 per tonne plus 15% of the fob port value. The peak season runs from Jan 1 to May 15 and from October 16 to December 31. The tax during the off-peak season that runs from May 16 to October 15 was set at $8 per tonne. Both the high and low tax rates are significantly less than those a year ago when the high rate was 80% and the low rate was 5% based on prices at the time.
Our Beijing team estimates that, given current raw materials and other costs, the breakeven price for the most efficient integrated Chinese DAP producers during this peak season is about $470 per tonne fob port. That is consistent with reports by industry publications in late January that Chinese exporters were offering DAP at $480 per tonne fob port and that the first ever export during the high-tax season was made to an Australian buyer at this level. We estimate that the breakeven price for non-integrated DAP produces is about $510 per tonne fob port during the current high-tax period.
Assuming no change in costs, the breakeven price for the most efficient integrated Chinese DAP producers during the off-peak season that begins on May 16 would drop to about $410 per tonne fob port. We estimate the breakeven price for non-integrated producers would fall to around $445 per tonne fob port during the off-peak season. If India ends up buying 5.5 million tonnes of DAP, Chinese producers are expected to supply significant volume during a narrow window, and part of this tonnage likely will need to come from higher cost producers.
I received a reply back from Raoul today.
I sent another email this A.M. to ask Raoul if he has a price target in mind. I'll post the reply if it comes.
I regret losing my temper with my first email to Raoul, his responses have been cordial. I hope he will pr the start up of production rather than wait for the 10Q.
SRSR up soon, will burning pinky short
Thanks Blue! I added a few more Friday.
SRSR going to bullish, shorter lose all power.
We go up from now.
I got a reply back from Raoul.
It doesn’t say anything we didn’t already know.
Raoul included a nice link to prices.
Now it’s back to hibernation till spring.
I posted the following to the website contact form this A.M. as well as an email to the company.
He say SRSR good stock
My unckel help me write this and he not have good english
I calling S.E.C..today, tell him to buying SRSR
I feel good time to buying srsr!!!
Drill spinning now. Soon we have report!
I calling SEC tell my frens buy SRSR
my layer she very hapy to buying srsr
say her frens will buying to
how mutch you sale?
GO SRSR
Big wall at $4.99...lol
Thanks Blue for the great pick here.
LovelyTrader, Yer off by $0.50, worst call I've seen on I-Hub.
Page 20-21 of this Deutsche Bank report shows an encouraging uptrend in phosphate price into January 2014, probably not enough for us to break out the party hats but at this point I'll take anything I can get. It looks like DAP bottomed in November.
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CCcQFjAA&url=http%3A%2F%2Fwww.phosagro.com%2Fget%2Fpresentation%2Fitem6372.php&ei=fU_mUoTBJ_KrsAT7hYHQCg&usg=AFQjCNGbgyKSVwv-GoTKV5p7AVsktlgXqQ&sig2=S-C2hFQEnS9ey6Dx4zMMlA&bvm=bv.59930103,d.aWc
My layer him saying Scott Keevil having success from SRSR.
Soon after then he dealing with short guys.
Go SRSR
that good thinking for srsr, not consperacy thinking
Go SRSR
Thanks dtstx, you have a good understanding of the process we're working through, do you work in the mining industry?
GLTA
My lawyer said SRSR is a buy.
Thanks dtstx, great post, that really cuts through the fog surrounding our current situation. Sorry I was off by a month on the dates for my comments. I guess now we wait for a jump in fertilizer prices. Where do you estimate phosphate prices need to be for us to begin production, I understood our costs to be the $30-$35 range.
GLTA
I talk to layer, he say buy SRSR
My grlfrien from China, sha write this for me.
GO SRSR
Hi Mike, when they complete the processing plant they should put out an update because it will be a major material event. I’m I know you are heavily invested here and I am too. I expect to see the share price start to move in the spring maybe around April but it’s just my WAG.
Good Luck
According to Nightroads conversation with Raoul that took place on 10/17/13 just two weeks before the end of the quarter Raoul stated that they were still focused on building the processing plant and that it would most likely be completed by years end. The 10q states that “building the mining facility was slowed down during the period ended November 30, 2013 since the phosphate market was getting worse”. Maybe I’m just grasping at straws but to me a mining facility is not the same thing as a processing plant and I think they’re continuing work towards finishing the processing plant just not mining and stockpiling ore. Any thoughts on this?
lol... when we get over a buck I think they will have to bid by the penny.
I bought my last shares at 0.071 but someone is waiting for our stockvest buddy to get bored and dump some more at bid. Can't really blame them, I could have twice the shares with half the average if I was more patient.
SRSR go up soon. I axsed stockbroker if this good stock and him say yes.
I axsd my girfren to wrote this, she not from here an she say ok.
It looks like there was a minor text change:
"China NASD OTC QB" became "China OTC QB"
I don't see anything else
There was some activity on the website on 01-12-13 but I don't see where they made any changes. Looks like they may update soon,
maybe today? I hope its a good one.
added a few
Agreed...and after the 10q we need some promo to keep the shareholders happy.
This is moving forward extremely fast.
Sterling is completing a mine and taking less than 3 years to do it. It takes most 10 years or longer to do the same thing if they are even successful. Just out of curiosity, how long do you think it would take you to build a mine from scratch?
GLTA
I hope Raoul will throw us a bone and do a corporate update soon otherwise we’ll be waiting until April to hear anything substantial. With the plant expected to be completed near the end of 2013 the upcoming 10q won’t tell us much of anything about progress towards its completion since the 10q only covers the period ending Nov. 30 2013. It also won’t tell us much of anything with regard to production since they’re holding off on mining until the plant is done.
Raoul, are you listening?
How many shares do you have to sell?
Patience Grasshopper, Let’s not put the cart before the horse.
A lot has happened in 3 years and all of it was necessary before they could begin to mine.
5 weeks until Raoul's forced to communicate again
Thanks Mike, hopefully good news for us all.
Is this your only penny stock?
The website is still down this A.M.
I'm sure it's just a coincidence but another stock I follow (SRSR*) has taken its website down late last week for changes and is displaying a coming soon message also.