Tuesday, September 7, 2010

Vale (NYSE:VALE) Joins BHP (NYSE:BHP) in Diversifying into Fertilizers

Although Vale (NYSE:VALE) and BHP Billiton (NYSE:BHP) aren't new to fertilizers, it is the growing focus for growth they're looking to the sector for, expanding far beyond their metals' base.

Vale has laid down the gauntlet, saying over the long term they're going to become the largest producer of fertilizer in the world.

At this time their goal for the next seven years for potash is to increase production to 10.7 million tons a year, and triple their annual phosphate production to 19.2 million. Now the company produces from 6 to 7 million metric tons of phosphate on a yearly basis.

If they achieve those combined goals, at that time they would be the largest producer of fertilizers in the world.

In potash they would still be behind Mosaic (NYSE:MOS) and BHP Billiton, assuming BHP lands the potash deal. Of course if they do, BHP has already said they're going to ramp up production, which makes the assertion of being the largest supplier of fertilizer in the world by 2017, making it a much larger challenge for Vale.

The bottom line is metal companies are diversifying even more, and the large ones are positioning themselves in a way which could make them much less cyclical when combining all their products.

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