Israel’s Psagot Investment House has downgraded Israel Chemicals Ltd. from a buy to market perform. A report issued by the Tel Aviv-based investment bank said the next few weeks would be crucial for determining the performance of its key Dead Sea Works subsidiary. Specifically, Psagot research head Limor Gruber cited the upcoming negotiations with Indian buyers.
In an interview with Green Markets, Gruber noted that the Indian government has set a potash subsidy price of $390/mt. This is below the average price of $400/mt for recent deals to China. Gruber notes that Indian prices have traditionally been 5-10 percent higher than prices in China. “If Dead Sea and other producers sign deals at prices below $420/mt, then this is likely to have an impact on other buyers like Brazil and will put downward pressure on prices,” she said. If this happens, Gruber said it will have a negative impact on ICL’s bottom line in 2011.
Earlier this month, DSW announced a major supply agreement with Chinese customers for 500,000 mt of potash in the first half of 2011. DSW noted that the price was in line with recent deals signed by other producers and is approximately $50/mt higher than 2010 prices, putting it at around $400/mt.
Gruber said that in recent years, China and India have become increasingly important markets for DSW. She estimated that in 2010, 36 percent of potash sales were to the two countries, and the level is likely to rise to 40 percent this year.