Morningstar | Raising Our Near-Term Potash Price Forecast On Reduced Supply Amid Continued Demand Growth
With most potash producers having reported second-quarter earnings, we've updated our near-term potash price forecast. We are increasing our 2019 price forecast to $300 per metric ton from $270 as we see new supply from K+S and EuroChem taking longer to ramp up than we had previously expected. Further, we see lower potash production from K+S' German potash mines also supporting higher prices in 2019, as the company is facing geological issues at its older mines. Our long-term price forecast of $310 per metric ton in nominal terms ($270 per metric ton in 2018 real terms) is unchanged. Over the long term, we think new supply from both K+S and EuroChem will eventually ramp up, which will balance the market from being undersupplied in 2019.Although we are increasing our near-term potash price forecast, we think the move will have less effect on sulfate of potash, or SOP, prices as the spread between standard potash and SOP remains elevated. Historically, the marginal cost SOP producers make SOP from standard potash and, over the long term, we expect SOP prices to track standard potash prices plus the cost of production. Although we think standard potash prices will be slightly higher in 2019, we expect unit production costs to rise as well.
Due to our potash price update, our Mosaic fair value estimate increases to $35 per share from $34. Our Nutrien fair value estimates increase to $65 per share from $64 and to CAD 85 per share from CAD 83 due to the potash price forecast and a slight weakening of the loonie versus the dollar since our last update. We maintain our EUR 18 per share fair value estimate for K+S, our $55 per share fair value estimate for SQM, and our $83 per share fair value estimate for Compass Minerals.
Compass Minerals International is a holding company. Through its wholly owned subsidiaries, the company is a provider of minerals, including salt, secondary nutrients and micronutrients, and specialty chemicals. The company has three reportable segments: Salt, which produces, markets and sells salt and magnesium chloride and sodium chloride; Plant Nutrition North America, which includes sales of sulfate of potash specialty fertilizer and specialty plant nutrients; and Plant Nutrition South America, which manufactures, distributes and markets an array of specialty plant nutrients and supplements developed and formulated from primary and secondary nutrients, specialty plant nutrients and biostimulants.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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