Saudi Arabian Fertilizers ratings cut
Riyadh, April 2, 2011
Credit Suisse downgraded Saudi Arabian Fertilizers Company (Safco), a leading Middle Eastern nitrogenous fertilizer producer, to "neutral" from "outperform," anticipating weak urea prices in the short term.
A fall in fertilizer demand in the second quarter after the spring planting in the United States and a weak corn market would keep urea prices below $360/tonne levels, Credit Suisse said.
In the medium-to-longer term, the brokerage also sees risk that marginal producers' urea floor price will likely be pushed $40/tonne lower owing to domestic industry consolidation.
Leading marginal urea producer and price setter Ukraine's "benign relationship" with Russia to secure cheaper natural gas supplies from Gazprom could hurt urea prices, it added.
Safco is among the lowest cash cost producers of ammonia and urea globally. Credit Suisse cut its price target on the stock to 190 riyals from 232 riyals.-Reuters