OREANDA-NEWS. February 08, 2010. The fertilizer sector agency Fertecon reports that BPC, the exporting trader of Uralkali and Belaruskali, will increase MOP spot prices for Asian and Brazilian consumers by US25 to US 425/t (cfr), with an immediate effect on sales. American producers also hiked US domestic prices from US 390 to US 420/st, from 1 March, reported the press-centre of OTKRITIE Financial Corporation.

View: The American, Brazilian, and SEA markets are always the first to raise prices with demand. As the increase is supported by producers from several regions, we assume that this 6% - 8% hike reflects a new, sustainable level. The increase will not substantially impact Uralkali’s EBITDA (upside risk is roughly 5%), so what is crucial here, are the general trends:

It is the first time since the crisis began that producers have raised potash prices;

Other types of fertilizers have already rebounded 25%+ from September’s low point. While Nitrogens were the first to drop in price when market sentiment changed, they are now the first to recover.

Indian contracts for potash supplies, to be settled in March – April, should approximate current spot price levels, or US 400/t (cfr) - US 420/t (cfr), which is above Chinese contract prices US 350/t (cfr).

Valuation and Action: At present, the only trigger for a change in our Uralkali’s valuation is the price increase. Trading on a 2010E EV/EBITDA of 10.5x, Uralkali appears fairly valued by the market. However, at their peak (2008), potash prices were at US 1000/t, leaving room for prices to outpace current estimates.