Psagot bullish on Israel Chemicals

Psagot: Potash prices have bottomed out, and prices are rising.

Psagot Investment House Ltd. has raised its recommendation for Israel Chemicals Ltd. (TASE: ICL) to "Buy", but kept its target price of NIS 34, compared with today's opening price of NIS 30.06. The share price rose 3.2% by early afternoon to NIS 31.02.

Psagot analyst Ilanit Sherf says that 2014 should see a turnaround in the global potash market, after two straight years of falling prices that hit a low with the break-up of the Russian potash cartel in mid-2013. She says that prices have stabilized in recent weeks on signals that Russia's Uralkali JSC (LSE: URKA) has retreated from its quantity-based strategy to resume a price-based strategy. It has notified Brazilian customers that it was raising prices 11% to $350-360 per ton from March 1, in view of strong demand. It also notified Indonesian customers that it would not honor verbal agreements made at less than $300 per ton.

Sherf says that the price hike in Brazil could affect potash negotiations in China, with contracts set at $300 per ton, above market forecasts. "The international situation could cause a correction in fertilizer companies' shares in view of expectations of a potash contract at $290 per ton," she says, adding that prices appear to have bottomed out.

Sherf believes that large buyers may prefer to exploit current potash price levels to boost inventories, which are low or non-existent in many parts of the world, following falling demand and prices. In addition, Potash Corporation of Saskatchewan Inc. (NYSE; TSX: POT) reports potash exports by North American producers rose for the third consecutive month in December, with sales in the fourth quarter up 30% over the corresponding quarter. Producers' inventory fell in December, after rising for three months, which Psagot attributes to lower production and higher demand.

Published by Globes [online], Israel business news - - on January 16, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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