Canpotex sets new potash spot prices $5/t above BPC's; neutral

Event: Canpotex announced on Friday that the new price level for spot markets (with an immediate effect on sales) is $415/t cfr for standard grade potash and $430/t cfr for granular grade. BPC has price levels of $410 cfr and $425/t cfr for these products, respectively. 

View: Price growth on the potash market is moving higher, though at a slow pace. In fact. it took nearly 2 months for prices to rise by a mere $5/t. We think these market conditions will remain until capacity utilization (currently at 80%, on average) reaches pre-crisis levels. In addition, any problems with spring Indian contracts (delays, prices significantly below the estimates of over $400/t cfr) may serve as justification for a price correction. Although we see some upside risk to our FY10 financial forecast (we assume $350/t for China and India; $405 - $415 for spot markets), we do not think that the overall impact on the EBITDA of either Uralkali or Silvinit will comprise more than a 10% increase. That said, we think that these developments have already been priced in by the market.