MINNEAPOLIS — On Tuesday the fertilizer hit the fan.
Share prices of nutrient companies were demolished as investors reacted to news that a big Russian fertilizer company would stop cooperating in a pricing cartel. The move is likely to slash prices for the fertilizer potash. Investors worried that it will slash profits for potash companies, too.
The Mosaic Co. saw its shares fall almost 25 percent before recovering slightly. Potash Corp. of Saskatchewan Inc. was down 23 percent. The declines wiped more than $13 billion from the stock market values of six large publicly traded potash companies.
Potash is a major fertilizer, used by farmers worldwide. It has been selling for almost $400 per ton. Some analysts believe the price could fall below $300 now.
The Belarusian Potash Company sells potash made by JSC Belaruskali and Russian mining company Uralkali. The two of them accounted for some 26 percent of the world's potash trade this year, according to Citi. The effect was that two of the world's largest potash suppliers controlled enough of the market to have a significant influence on prices.
That's all changing now. Instead of limiting production and keeping prices higher, Uralkali says it will max out its production and sell at spot prices.
"Uralkali has started a price war," Citi analyst Andrew Benson wrote. The company is talking about selling potash for $300 per ton, he wrote, which "could lead to a significant upturn in demand in 2014." In the meantime, though, the changes "imply a substantially poorer profit outlook" for the rest of this year and 2014 than investors had previously expected, he wrote.
In afternoon trading, shares of Mosaic Co. were down $9.32, or 17.6 percent, to $43.64. Potash Corp. of Saskatchewan Inc. fell $6.35, or 16.7 percent, to $31.56. Agrium Inc., which is a partner with Potash Corp. and Mosaic in a Canadian marketing arrangement, fell $4.58, or 5 percent, to $86.85.
Smaller players were hurt, too. Intrepid Potash Inc. fell $5.59, or 28.8 percent, to $13.85. Compass Minerals International Inc. fell $16.42, or 18.5 percent, to $72.50. Chemical & Mining Co. of Chile Inc. fell $6.78, or 18.3 percent, to $30.33.