rising phosphate demand & tightening supply

In the latest Profercy Phosphates Report, dated 12 July 2011 the following is reported:

"Phosphates firm; Brazil P surge; India talks; Morocco Unrest
International markets continue busy as demand continues solid for spot and contract tonnes. The latest Brazil data shows the country's phosphate deficit is widening rapidly. India talks are restarting, just as fresh uncertainty on US supply emerges. Ethiopia is another market with a forward demand surge likely. On the supply side, the market is still digesting the Florida mine injunction"

It goes on to give more detail, but that is the guts of it. I'd copy & paste but it's a PDF and I'm not a touch-typist.

P pricing-wise, on page 1 its reported "There are reports of DAP bids at $645-650pt cfr". This lines up with earlier posts where P pricing has been trending up. One would expect this will continue for the foreseeable.

On page 2 a handy summary is given of the latest decision by the District Court to grant a preliminary injunction preventing all mining activities on the Hardee County extension of Mosaic's South Fort Meade phosphate mine in Central Florida. This is a serious blow for Mosaic for their RP supply, as displayed by their intention to "vigorously pursue all options to obtain relief".

Mosaic ann'd this to market earlier this week, incl thru their website (see link below). In their ann, amongst other things, they describe how they intend to compensate for the loss of rock supply as a result of this injunction:

"Mosaic believes it will be able to support planned finished phosphate fertilizer production levels through the end of fiscal 2012 through a combination of existing phosphate rock inventories, higher output from its other Florida mines, increasing shipments from the Company's Miski Mayo joint venture, and supplemental purchases of phosphate rock from third parties. Mosaic's initial analysis indicates that the combination of higher costs for purchased phosphate rock and unabsorbed fixed costs could increase fiscal 2012 pretax costs by approximately $200 million.

Mosaic intends to seek a stay of the preliminary injunction pending appeal as to the uplands-only mining. The Company hopes to receive a ruling regarding the stay within the next few months. Should a stay of the preliminary injunction not be granted, Mosaic estimates that the legal process could take 12 to 24 months to review these issues."

This is unfort for Mosaic but it all bodes well for upward pricing of rock & other P products, thru tightening supply while demand continues to strengthen.

http://phx.corporate-ir.net/phoenix.zhtml?c=70455&p=RssLanding&cat=news&id=1583737

GL to all