Trade magazine "Fertilizer Week" reports that Israel Chemicals Ltd. (TASE: ICL) will sign a potash contract with China on Monday. Israel Chemicals will sell 300,000 tons of potash at $350-360 per ton, giving the contract a value of up to $108 million.
Migdal Capital Markets analyst Amir Adar says that Israel Chemicals' signing a potash contract with China before Canada's Potash Corporation of Saskatchewan Inc. (NYSE; TSX: POT) is disappointing, because Israel Chemicals could have obtained a higher price if it had waited for the Chinese and Canadians to complete their negotiations.
Adar believes that Potash Corporation's refusal to sign a contract with China so far is due to the company's wish to maintain potash prices in Brazil and Southeast Asia. He said, "We're in a situation in which there is no complete common interest between the potash producers, and each producer makes its own calculations, because no supply shortage is expected."
Despite declining risk, and rising expectations about improved market conditions for the ICL Industrial Products Division, Adar believes that Israel Chemicals' share price does not reflect the change in the potash market of the past year. He therefore reiterated his "Sell" recommendation for the share with a target price of NIS 41, 21% below today's opening price.
Israel Chemicals' share fell 1% by midday to NIS 51.92.
Published by Globes [online], Israel business news - www.globes-online.com - on January 17, 2010
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