Phosphate may benefit from Coronavirus

Phosphate, one of the commodities, may benefit from China’s outbreak of Coronavirus. As a matter of fact, the virus hinders the plant’s curtail production and transport. The Chinese market may become an opportunity for the nutrient, said Joc O’Rourke, chief executive officer of Mosaic Co., the world’s largest producer of Phosphate.

Phosphate is a chemical compound that has multi-faceted use in production. It is a nutritional supplement for animals. Also, often utilized to make chemicals for industrial use. The most important application of it is in the production of fertilizers for agriculture.

Much of China’s phosphate production is based in Hubei province, the center of the outbreak. The coronavirus epidemic has shut down economic activity there. According to Mosaic Co. company, the supply drop is expected to tighten the market further.

North American producers see the benefit

Jonas Oxgaard, an analyst at Sanford C. Bernstein, mentioned that there wouldn’t be a demand impact, but it would have a supply impact. It’s the best opportunity for US fertilizer companies. On Thursday, the US Department of Agriculture said that the fertilizer downturn might be over. The phosphate market is tightening.

North American farms saw a lot of rain last year, which led to reduced fertilizer demand. Apparently, US corn plantings will rise to the highest in four years, while soybean plantings also increase.

In 2019, the Mosaic Company, the largest US producer of potash and phosphate fertilizer, reported an annual loss of nearly $1.1 billion. Joc O’Rourke, President and CEO of the Mosaic, said in the statement that in this challenging environment, the company acted decisively. It executed well and strengthened the company’s operations for the future. The actions to manage the company’s portfolio of assets and lower their cost structure, their reduced inventories and the expected strong global fertilizer demand in 2020 give them hope this year. It’s a tremendous opportunity to capitalize on the improving trends we’ve seen, says Joc O’Rourke.

The company statement projected a 2020 recovery based on a drawdown of fertilizer inventories and an increase in domestic and international demand. Mosaic shares acquired as much as 4.8% in New York on Thursday, the most in two weeks. Nutrien Ltd. climbed as much as 2.3%, while CF Industries Holdings Inc. grew 3.1%.

Ben Isaacson from Scotiabank said that the market is screaming ‘bottom.’ Nutrien’s share price increased even after its quarterly profits and guidance missed consensus.