South America Calling

Fertilizer Price Collapse Influenced Consolidation

Russ Quinn
By  Russ Quinn , DTN Staff Reporter
Connect with Russ:

The multi-year collapse in fertilizer prices that has pushed many nutrients to seven-year or worse lows continues to prompt industry consolidation.

Vale SA, a Brazilian mining company, announced Monday it will sell most of its fertilizer business to U.S.-based The Mosaic Company for $2.5 billion, according to a Dow Jones report. The acquisition represents a key foothold in the one of the world's largest fertilizer markets for Mosaic and it should also help feed existing distribution networks in Brazil.

"If you want to grow in agriculture and fertilizers it has to be in Brazil," Floris Bielder, Mosaic's Brazil president, said.

For Vale, the deal brings an end the one-time hopes of capitalizing on global population growth by producing fertilizers. The company identified fertilizer ingredients as a strategically important business several years back, but it just never got off the ground, accounting for just 8% of Vale's overall revenue in the third quarter and posting negative earnings before interest and taxes.

Rumors have swirled for months that Mosaic could be in line to purchase the fertilizer business from Vale. Back in mid-November at The Fertilizer Institute (TFI) Fertilizer Outlook and Technology conference held in Fort Lauderdale, Florida, the sale of Brazilian fertilizer businesses was a topic of discussion.

Blake Hurtik, Argus FMB editor, said at the time that consolidation in the Brazilian fertilizer business could be on tap in the near future. He cited recent fertilizer company sales in the South American country and even had a graphic in his presentation with the Vale logo with a question mark after it.

There is no question any longer with this announcement on Monday.

(To see more about Brazil's fertilizer situation, including some of the challenges it faces, check out DTN's Global Fertilizer Series - 5 story from earlier this month at http://bit.ly/…).

Russ Quinn can be reached at russ.quinn@dtn.com

Follow Russ Quinn on Twitter @RussQuinnDTN

(ES)

Comments

To comment, please Log In or Join our Community .