Incitec poised to benefit from Russian export ban

Incitec Pivot (ASX: IPL) has quietly rallied 13% in March and is poised to benefit from the broad-based spike in commodity prices. 

For the uninitiated, Incitec is an industrial chemicals manufacturer supplying industrial explosives and fertilisers to the agriculture and mining industries.

In FY21, the company generated 58% of its revenues from its industrial explosives business and the remaining 42% from supplying fertiliser's to the Asia Pacific region.

Russia-Ukraine crisis to elevate prices 

Credit Suisse is the latest broker to have upgraded Incitec, bumping its stock from Neutral to Outperform with a $3.85 price target. 

Supply tightness and elevated prices for key raw materials including nitrogen and phosphate were the main drivers behind the upgrade. 

Last week, major international shipping companies including container lines suspended shipments to and from Russia, in-line with mounting Western sanctions.

The move will block Russian exports including potash, phosphate and nitrogen used to produce explosives and fertilisers.

For context, Russia is the world's largest exporter of fertilisers, producing more than 50m tonnes a year or 13% of global production, according to Reuters.

Outlook for FY22

Incitec's FY21 results presentation last November outlined a broad increased in key raw materials.

Source: Incitec 2021 Full Year Results Investor Presentation

The Russia-Ukraine war has only intensified pricing conditions.

According to S&P Global Platts, Northwest Europe ammonia prices was trading at US$1,150/mt on 24 February. An almost 40% increase compared to last November spot prices.

Incitec is expected to deliver its half-year results and dividend announcement on 23 May.

Incitec 12-month price chart