With the potash oligopoly shaken by news that Uralkali will exit cartel-like Belarus Potash Company, we are cutting both our near-term and long-term forecasts for potash prices. We expect prices will fall substantially in the near term as Uralkali resets global markets with a new China contract. Uralkali has commented that prices may fall below $300 per metric ton on a delivered basis to China versus current contract prices of about $400/mt. As such, we are cutting are near-term price realizations for potash producers. We think other players will have incentive to follow suit on pricing, but the reaction of other producers in the market (particularly Canpotex producers) will determine the depth of near-term price drops, in our view. It's even possible that Uralkali will sign a new China contract materially above the "below $300" price that it signaled.
While lower prices will be painful for the industry, the price drop will, in our opinion, cause the vast majority of greenfield potash projects to be shelved for the time being. Notably, we think BHP Billiton and Eurochem won't push forward with greenfield expansion plans in the face of lower potash prices. In addition, Uralkali announced that it would delay its Polovodovsky mine. Because new potash mines take years to get from the design stage to full capacity utilization, lower potash prices today will likely result in lower-than-anticipated supply in the years ahead. Our new supply forecast only includes about 2.0 million metric tons of greenfield expansions through 2020.
Based on Uralkali exiting the potash cartel, our new long-term price forecast for potash is $300/mt at the typical plant gate in Saskatchewan, compared with current spot prices of about $375/mt and our previous forecast of $375/mt. This new forecast sits somewhat above our estimate for long-term marginal costs of production, as we're not certain Uralkali intends to drive prices down all the way to marginal costs. Further, without meaningfully greenfield additions, the potash market should be tight toward the end of the decade.
We have published new fair value estimates for PotashCorp and Compass Minerals and will post updated valuations for the other potash producers in our coverage universe shortly.
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We think PotashCorp has a wide economic moat thanks to its low-cost potash assets and high barriers to entry created by staggering greenfield capital costs. PotashCorp is on the low end of the potash cost curve, allowing the company to pump out profits even if potash prices should approach marginal costs of production in the future. Lower costs stem from the geology of the company's Canadian deposits and the scale of its mines. Further, barriers to entry in the potash market are high, in our opinion. Economically viable deposits are found in only a handful of locations around the globe, with Canada, Russia, and Belarus as the main producing regions. PotashCorp's brownfield expansions come at lower capital costs per ton than proposed greenfield projects, most notably BHP Billiton's Jansen project. Additionally, greenfield projects can take more than seven years to complete and fully ramp, creating a barrier to entry for new participants. Further, PotashCorp will be able to produce potash for many years to come with reserve lives for its mines ranging from 65 to 85 years at current production levels. We expect average returns on invested capital of roughly 18% over the next five years, despite pressure on potash prices from growing supply and a potential end to high prices previously supported by a rational oligopoly. If we become more confident that the cartel-like nature of the potash oligopoly is truly dead and all competitors in the industry begin to produce at capacity without regard to price, we may reduce our wide-moat rating for PotashCorp, as this could mean high cost producers could be "kicked off" the cost curve, leading to lower marginal producers setting market-clearing prices. However, we view this scenario as very unlikely.
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We're lowering our fair value estimate to $38 per share from $49 per share, as we lower both our near and long-term expectations for potash price realizations. Based on Uralkali exiting the potash cartel, our new long-term price forecast for potash is $300/mt at the typical plant gate in Saskatchewan, compared with current spot prices of about $375/mt and our previous forecast of $375/mt. This new forecast sits somewhat above our estimate for long-term marginal costs of production, as we're not certain Uralkali intends to drive prices down all the way to marginal costs. Further, without meaningfully greenfield additions (we think the lower near-term price all but eliminates greenfields from the picture), the potash market should be tight toward the end of the decade.
Our fair value estimate implies price to earnings of 16 times and enterprise value to EBITDA of 10 times, based on 2013 estimates. We expect tepid sales growth in the firm's potash business over the next several years, as volume gains from brownfield expansions outweigh weaker potash prices. As a result of lower prices, we expect potash gross profit per ton will compress compared with 2012. We predict PotashCorp will sell about 14.5 million metric tons of potash in 2017 versus operating capacity of approximately 17 million metric tons. We think strong nitrogen results will continue in 2013 as a result of recent high corn prices, but we expect some pressure on nitrogen margins over the long run as corn prices sink and natural gas costs rise. The nitrogen segment will receive a near-term volume boost from the reopening of the Geismar plant in Louisiana in 2013. In phosphate, we anticipate long-term segment gross profit will be in similar to 2012 results. We use a cost of equity assumption of 10%.
