Potash Corp faces supply shortage - JP Morgan

(Figures in U.S. dollars unless noted)

WINNIPEG, Manitoba Aug 29 (Reuters) - Potash Corp of Saskatchewan (POT.TO) risks running short of supplies to fill contracts because of a strike at three of its mines, an analyst with JP Morgan said in an alert to clients.

David Silver said the strike, which began three weeks ago, limits supplies at a time when world markets were "already exceptionally tight.

"Absent a settlement, we believe Potash Corp may soon be forced to declare force majeure due to an inability to meet current contractual commitments," Silver wrote.

The company has said the strike has affected industrial customers, accounting for about 5 percent of sales.

It has also said it's too early to say whether the strike will affect its ability to meet sales commitments in its mainstay fertilizer business.

There are no talks scheduled between Potash Corp and the United Steelworkers union, which represents about 500 striking workers at the mines.

The mines account for about 6 percent of world capacity for potash, a fertilizer farmers need to boost yields.

Potash Corp shares were up C$1.09 at C$187.50 on the Toronto Stock Exchange on Friday.

Managers restarted production at the largest of the three mines, but will probably restore only about half of production, which was 1.744 million tonnes in 2007, Silver said.

A strike lasting eight weeks would reduce the company's potash output by 240,000 to 270,00 tonnes, Silver said, costing it 15 to 20 cents per share.

But he did not change his third-quarter earnings estimates of $3.80 per share nor 2008 estimates of $13.25 per share, noting ammonia fertilizer prices have strengthened.

($1=$1.05 Canadian) (Reporting by Roberta Rampton; editing by Rob Wilson)