In yesterday's post, "Intrepid Potash to Report Tomorrow, Conference call on Wednesday (IPI)" I asked:
What if the whole thing is a bluff on Uralkali's part?Today we have Barron's reporting:
Potash companies were falling for a second day in a row today, as investors worried that moves by a Russian cartel will push down prices.
Potash Corporation of Saskatchewan (POT) was falling 4.5% while Intrepid Potash (IPI) tumbled more than 8% and Mosaic (MOS) lost 5%.
Credit Suisse analyst Christopher Parkinson downgraded both Potash Corp. and Intrepid to Underweight today, noting “the end of a pricing era”, with new target prices of $27 and $11, respectively. He maintained a Neutral rating on Mosaic, although he reduced his target price to $41 from $65.
Parkinson writes that he thinks that Uralkali’s strategy will “eventually lead to a full breakdown of industry discipline and consequently further pricing pressure in the 2H13 and into 2014.”Asked and answered counselor.
More thoughts from his note:
The Russians Aren’t Bluffing, the Threat to Pricing is Real: We believe Uralkali’s strategic move to target volumes and subsequently leave Belarusian Potash Corporation (BPC) was only a matter of time (albeit clearly unexpected in the near term), with recent market share losses in Latam and lack of pricing discipline on Belaruskali’s end acting as the boiling point. At the risk of losing market share (even in a growing market) we believe Canpotex producers will have no choice but to gradually follow suit and drop price in order to defend their respective growth outlooks, particularly with additional capacity coming on-line during the next ~2 years....MORE