The Global Resource For Connecting Buyers and Sellers

S&P downgrades fertilizer firms on market weakness

Fertilizer prices have weakened significantly in 2016, which has raised red flags at Standard & Poor’s. The credit rating agency downgraded three of the sector’s global giants on Tuesday, including Canadian firm Potash Corp. of Saskatchewan Inc.

S&P analysts said they expect nitrogen, phosphate and potash prices to remain below 2015 levels for the “next several years,” with anticipated declines of 10 per cent to 30 per cent between 2016 and 2018. They cited low crop prices, rising supply, overall negative sentiment for commodities and other factors for the grim outlook.

“We therefore forecast lower earnings and higher leverage for the companies than we anticipated before,” the analysts said in a note.

In the case of Potash Corp., the S&P analysts reduced the credit rating to BBB+ from A-. They pointed out that the Saskatoon-based company is improving its operating efficiency and has reduced its dividend and capital spending, but they do not think those measures will “fully offset” the deterioration in prices.

In addition to Potash Corp., they downgraded the credit ratings of EuroChem Group AG and K+S AG. OAO Uralkali was not downgraded, but the analysts revised the credit outlook to negative from stable.