Potash Market at Inflection Point

Published on: 23:10PM Sep 02, 2010

Despite a $39 billion offer - one of the juiciest bids to enter the fertilizer industry in years -- I’m not surprised Canada-based PotashCorp summarily rejected the recent offer by BHP Billiton to acquire the fertilizer producer. PotashCorp’s board of directors voted unanimously to refuse the unsolicited offer and strongly urged shareholders to reject BHP Billiton’s "opportunistic offer and not tender their shares."

I’ve been covering the fertilizer industry for years. Given what we’re seeing with rising global demand for fertilizer and higher prices, I think the potash market is approaching an inflection point.

Potash is found only in 12 countries and each mine takes at least seven years to build, compared to less than two for other types of fertilizer. Right now, PotashCorp has 20% of global capacity, as well as stakes in potash mines in Chile, China and the Middle East. In addition, the share price of PotashCorp has been linked historically to grain prices, which have been on the uptick lately. The Canadian company is sitting in a sweet spot for potential growth and profits.

It will be interesting to watch and take bets on how long the company’s shareholders will hold out. Rumor now has it that hungry dragon (China) is interested in PotashCorp…..