Mosaic cuts potash sales outlook as hurricanes, electrical issues disrupt production

The Mosaic Company has sent shockwaves through the market by slashing its third-quarter 2024 sales forecast for potash and phosphates. The company cited severe operational disruptions, including mechanical failures and significant weather-related issues, as the main causes behind its downward revision.

For the July and August 2024 period, Mosaic’s potash sales volumes reached only 1.31 million tonnes, down significantly from 1.48 million tonnes during the same period in 2023. Potash revenue also took a hit, plummeting from $489 million to $358 million. This decline comes in the wake of production halts at its Colonsay mine in Canada, where electrical issues crippled output for weeks before repairs were completed. Although operations have resumed, Mosaic admitted that further repairs and upgrades will take place to ensure reliability moving forward.

The company’s phosphate segment did not fare any better. Phosphate sales volumes for the two-month period fell from 1.08 million tonnes in 2023 to 937,000 tonnes this year, with revenues dipping from $642 million to $620 million. The phosphate sector faced its own challenges, particularly Hurricane Francine, which briefly halted production at the company’s Louisiana facility. Despite resuming operations, Mosaic had to adjust its overall guidance for the third quarter, now expecting phosphate sales volumes to range between 1.45 million and 1.65 million tonnes, down from its initial forecast of 1.7 to 1.9 million tonnes.

Severe weather wreaks havoc on shipments and production

Mosaic’s struggles in 2024 have been compounded by a series of weather-related disruptions. Just as production resumed at the Louisiana facility after Hurricane Francine, Hurricane Helene caused the Tampa port to shut down, curtailing product shipments. Given the uncertainty over when shipments would resume, Mosaic preemptively lowered its shipment guidance. The company expects to recover some of these delayed volumes in the fourth quarter, but the damage to third-quarter performance is already apparent.

In addition to production woes, the company has faced market-related struggles. Potash prices have remained relatively stable between $200 and $220 per tonne, but declining demand, particularly in international markets, has pressured Mosaic’s margins. Meanwhile, the price for diammonium phosphate (DAP) remains within the previously guided range of $555 to $575 per tonne.

Expert insight: What analysts are saying

Industry experts have reacted swiftly to Mosaic’s lowered guidance. Analysts have pointed out that while production has largely resumed, the issues at Colonsay and Hurricane-related delays will continue to weigh on Mosaic’s ability to meet its full-year targets. One industry insider noted that Mosaic’s recovery efforts may not be enough to offset the current challenges, saying the company will need to “maintain operational reliability and capitalize on future price recovery in the fertilizer market.” While experts remain cautiously optimistic about the company’s long-term outlook, many are closely watching the upcoming Q3 earnings report for more concrete data.

Outlook and future prospects

As Mosaic moves into the final quarter of 2024, its primary focus will be on recovering lost volumes and stabilizing operations at its key facilities. The company’s downward revision for third-quarter potash sales volumes to 1.85–2.05 million tonnes from the initial 2.1–2.3 million tonne estimate highlights the challenges it continues to face.

However, Mosaic’s strong market presence and diversified product portfolio could help it weather the storm. Its Fertilizantes segment in Brazil, for instance, saw sales volumes decline from 2.02 million tonnes in 2023 to 1.85 million tonnes in 2024, but the company remains optimistic about future growth in this region.

Despite the operational hurdles, Mosaic has reaffirmed its commitment to maintaining its production guidance for the fourth quarter and capitalizing on improved market conditions, should they arise. Investors will be watching closely to see if the company can recover from what has been a tumultuous third quarter.