BELARUS NEWS AND ANALYSIS
DATE:
24/03/2008
Potash Shares Surge on Higher Contract Prices, Analyst Upgrades
By Brenda Bouw
VANCOUVER (CP) -- Shares in Canadian potash companies grew Monday after global contract prices more than doubled and stocks were upgraded by at least two major Canadian investment banks.
RBC Capital Markets upgraded shares of Potash Corp. of Saskatchewan Inc. [TSX:POT], the largest maker of the crop fertilizer, to "top pick" from "outperform" on Monday and raised the target price to C$250 from C$195.
RBC analyst Fai Lee expects Potash Corp.'s share price to increase over time "as investors digest the recent upward movement in potash and phosphate fertilizer prices."
That nod helped send the company's shares up C$6.44 Monday, or 4.36%, to close at C$154.01 on the Toronto Stock Exchange.
Both Belarusian Potash Co., a Belarus-based potash supplier, and Indian Potash Ltd. recently agreed to a contract potash price of C$625 per metric tonne - up sharply from a previous price of C$270 per tonne.
Pricing for the fertilizer has been supported by factors that include rising demand for ethanol, made from corn.
Lee believes the recent Indian contract will set the tone for negotiations with other countries, like China.
"We believe it is only a matter of time before Chinese potash prices approach global levels," Lee wrote in a client note.
Last week, CIBC World Markets analyst Jacob Bout upgraded Potash Corp. to "sector outperform" from "sector perform" and raised its price target to C$200 from C$155.
"The Indian contract settling before the Chinese negotiations, unprecedented historically, is an indication of the current tight supply and demand fundamentals for potash," Bout wrote in a client note.
Saskatoon-based Potash Corp. produces fertilizer, industrial and animal feed products. The stock, one of the most expensive on the Toronto Stock Exchange, has risen steadily in the past year, ranging from C$59.44 to C$164 in the past 52 weeks.
Also Monday, shares of fertilizer firm Agrium Inc. [TSX:AGU] benefited from the global contracts and subsequent analyst upgrades, rising about 3%, or C$1.95 to C$64.75. Agrium produces nitrogen, phosphate, and potash, as well as other agricultural products.
Other potash companies that surged in trading Monday include Potash One Inc. [TSX-V:KCL] which rose more than 7% or 25 cents to C$3.75 on the TSX Venture Exchange, as well as Anglo Potash Ltd. [TSX-V:AGP], which saw its shares grow nearly 6%, or 28 cents to C$5.10.
Raymond Goldie, an analyst at Salman Partners, said many investors are getting into to the agricultural sector as they watch the prices of food rise.
"People are looking for ways to play agricultural stocks," Goldie said, adding that India and China are some of the most important when it comes to fertilizer consumption.
Source:
http://www.resourceinvestor.com/pebble.asp?relid=41405
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