Why Is Potash Corporation of Saskatchewan Inc. Surging?

Potash Corporation of Saskatchewan Inc. (TSX:POT)(NYSE:POT) is moving higher. What’s going on?

The Motley Fool

Potash Corporation of Saskatchewan Inc. (TSX:POT)(NYSE:POT) jumped 6% on June 23, and investors are wondering if the brutal rout is finally over.

Let’s take a look at the reasons for the surge and see if more upside is on the way.

Russia-Belarus partnership?

Potash prices plummeted 25% in 2013 when producers Belaruskali and Uralkali ended a comfortable marketing partnership.

Since then, the two companies have been embroiled in a nasty battle for market share that has kept potash prices under pressure. The break-up of the cartel was just one part of the pain hitting the market, but the damage to margins has been so bad that the two companies are considering a reunion.

A Reuters report says Uralkali and Belaruskali, the world’s top two potash producers, might renew their agreement after Belarus president Alexander Lukashenko made comments at an event in Minsk that suggest the two rivals might be ready to kiss and make up.

“Let’s resume work and agree how much we will produce,” Lukashenko said.

The news sent investors piling back into fertilizer producers, including Potash Corp., which rallied more than 6%.

India deal

News that Belaruskali is on the verge of signing a new one-year supply contract with India also provided support for the sector.

India and China normally have agreements in place much earlier in the year, but the two countries have extended negotiations in 2016. China still doesn’t have a deal, and it is rare for India to be the first of the two countries to sign on the dotted line.

Details of the agreement will be keenly anticipated in the coming week as global buyers have been sitting on the sidelines waiting for China and India to finalize their supply agreements.

Why?

The prices the two countries negotiate often serve as a floor for the rest of the market.

Is it time to buy Potash Corp.?

A renewed Uralkali-Belaruskali marketing agreement should be positive for the market as the two firms would once again moderate output. In fact, a deal could signal the bottom for the multi-year rout.

Potash Corp. has sold off so much that the upside potential probably outweighs the downside risk at this point. If you have a contrarian investing style, it might be worthwhile to add a bit of the stock to your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of Potash Corp.

More on Metals and Mining Stocks

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Stocks for Beginners

Cameco Stock and More: 3 TSX Commodity Titans to Watch in 2024

Cameco stock and these others will provide you with growth that goes beyond just a year or two, with all…

Read more »

Handwriting text writing Are You Ready For Tomorrow question. Concept meaning Preparation to the future Motivation Stand blackboard with white words behind blurry blue paper lobs woody floor.
Stocks for Beginners

3 Reasons to Buy Lundin Stock Like There’s No Tomorrow

Lundin stock (TSX:LUN) has been killing its production of copper and plans on blowing its records out of the water…

Read more »

Gold bars
Stocks for Beginners

TSX Materials in March 2024: The Best Stock to Buy Right Now

Materials have been quite volatile, though the price of gold has surged to all-time highs. That makes this stock a…

Read more »

Gold bars
Metals and Mining Stocks

Will Gold Stocks Rally in 2024?

Down almost 30% from all-time highs, Franco-Nevada is a gold mining stock trading at a discount to consensus price target…

Read more »

A miner down a mine shaft
Stocks for Beginners

Canadian Mining Stocks: Buy, Sell or Hold?

Canadian mining stocks have seemed like such a strong investment, but with shares down significantly this year, what should we…

Read more »

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)
Stocks for Beginners

Great News for Gold Stock Investors!

Gold has hit an all-time high! Which is good news for some gold stocks, and really good news for others.

Read more »