Monday, May 3, 2010

Can China Drive Potash (NYSE:POT) Profits

The more I hear coming out of China, the more it seems there is a weight over the country which may start to make producers of a variety of raw materials - including Potash (NYSE:POT) - a little nervous.

A growing number of analysts and economists think China real estate could have a bubble burst this year, which would slow down growth and put downward pressure on demand for a variety of goods.

Already China is taking measures to cool of the speculative real estate market, which may result in a 20 percent drop in property prices in the second half of 2010.

This is important for Potash and other agricultural and raw material companies because most of them are counting on China driving their revenue and profits more than any other country.

So if the China story starts to change, it could make a huge dent in the revenue and profits of Potash and many other producers of commodities and raw materials.

In other words, the growth rate of China cannot be guaranteed, and a minimum it should slow in the second half, and probably even more in the first half of 2011.

That would change the picture for everyone involved, and is probably a main factor in the price of copper continuing to be down.

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