I bought a small position of K+S (German potash producer) during the meltdown (a little too early, actually). I believe this to be a generally sound company that is run well, and the downturn to be an exaggeration. It's somewhat of a two-fold approach for me: If I'm right, and the stock bounces back in the short run, I'll sell for a quick buck. If the recovery takes longer, I'll stick to my usual buy-and-hold approach. And in case I'm wrong, I made sure to use only the play money budget.
Which may well be the case, as the stock is dropping like a stone after today's announcement of the Q3 result, which wasn't even that bad.
Uralki can produce potash for $60 a ton, the high cost producer K+S AG, has costs of $290 per ton and has a greenfield project in Canada to expand their production from 7 million tons presently in Europe to 11 million total worldwide but they had stated they needed a sales price exceeding $380 a ton to make this economically feasible. At 4 billion to build the potash facility $300 a ton will probably get the project cancelled.
It's 'Uralkali'. The reason for K+S's project in Canada is not so much volume expansion, but the fact that their German reserves will be depleted in a couple decades. They can either move abroad, or die. Hence this project will not easily be cancelled. Also, I read a figure lower than $380 a ton to be profitable, but I cannot find any source for that right now.
Here's a link to the price development of Potash, unfortunately in German:
Kaliumchlorid - monatlicher Preis - Rohstoffpreise - Preis Charts und Daten - IndexMundi
Prices are in USD per (I guess?) metric ton. Despite the recent turmoil, they have hardly moved at all so far. This may partly be due to long-term delivery contracts, but I think the $300/t announced by Uralkali were just meant to scare away potential competition, as Running_Man has explained very well.
Another thing to keep in mind: Yes, Uralkali can produce really cheap, but you need to consider also shipping costs. Western producers have a big advantage in that they are much closer to the consumers of their products.
Finally, there is not really ONE world market price for potash. At least K+S claim that they produce a variety of specialty products that sell at a premium.
Remember, as long as there is natural gas, there will be ammonia-based fertilizers produced. And North America is flush with gas. Forecast is excess supply of N fertilizer by 2016.
