Neue Rakete von Herrn Ian Mc Donald ?

Posted on July 25, 2013 by Robin Bromby

Potash producers will maintain their discipline and good margins despite falling crop prices. And, as for rare earths, the greatest market will — notwithstanding patterns of growth — still be in the lights but it will be the heavies that make more money. These are among the predictions in a new report from Goldman Sachs, Mining Commodities: The focus shifts to the supply side.

The overall message in the report is that, as demand growth remains lacklustre, and several commodity markets move into surplus, the timing and scale of future supply response becomes the main decider as to when prices make their recovery. On the other hand, Goldman thinks the present cycle is near its bottom and some prices will have overshot on the downside. This report also contains comments on potash and rare earths.

In the short term, Goldman expects attempts by producers to exercise their bargaining power to try and secure higher prices will be met with strong push-back from buyers against a backdrop of a strong harvest, rising grain stocks and soft crop prices.

Looking beyond the current crop cycle, the analysts expect prices to average $520/tonne over 2015-17, equivalent to a ~70% premium over the estimated $300/tonne estimate of marginal production costs. Longer term, the emergence of new players is seen as driving prices to converge around $475/tonne.

But potash has done not too badly.