UPDATE 2-Potash Corp extends shutdowns at its largest mines

Wed Feb 22, 2012 6:01pm EST

* Extends Lanigan, Rocanville shutdowns until March 31

* Move reflects continued weakness in potash demand

* Potash Corp shares close slightly higher on TSX, NYSE

TORONTO, Feb 22 (Reuters) - Potash Corp , the world's largest fertilizer producer, said on Wednesday it has extended temporary shutdowns at two of its largest potash mines as it battles to reduce inventories that are rising due to weak demand for the crop nutrient.

In a brief statement, the company said it is extending the shutdowns at both its Rocanville and Lanigan potash mines in the Western Canadian province of Saskatchewan by four weeks until March 31.

Saskatoon, Saskatchewan-based Potash Corp, which began cutting potash output late last year, said its strategy is aimed at matching supply with market demand.

Rocanville, which was temporarily shut in late December, has the capacity to produce 2.8 million tonnes of potash a year. Lanigan, which was shut in early January, can produce 3.4 million tonnes annually. The latest extension is the second at Rocanville, while Potash Corp is extending the Lanigan shutdown for the first time.

"I'm a little surprised that things are still so weak, because this is February and we are getting closer to the spring plantings," said Lazard Capital analyst Edlain Rodriguez. "It kind of tells you where the market is right now."

Earlier this month, data released by Potash Corp indicated that North American potash inventories rose around 20 percent in January from the previous month, signaling a possible drop in prices even as miners scrambled to cut output.

U.S. rival Mosaic recently outlined plans to cut its potash production by 20 percent over the next four months as distributors have been drawing down existing inventories and delaying big purchases.

The price of the crop nutrient, which typically lags a sharp move in inventory levels, is little changed at about the $500 a tonne level, according to the most recent Potash Corp data.

Inventories in North America now stand 32 percent above the five-year average as large buyers such as China, India and Brazil have stayed out of the market.

Despite one of the biggest builds in potash inventory levels since the aftermath of the 2008-09 global economic meltdown, producers say they remain confident that demand will once again gather steam as the spring planting season in North America gets underway.

Analysts remain more cautious, though, as the last slump led to an extended standoff in potash markets as producers held off cutting prices for months, while farmers and dealers halted most purchases due to steep prices.

Shares of Potash Corp ended the day up 46 Canadian cents at C$47.34 on the Toronto Stock Exchange, while its New York-listed shares ended the day up 18 cents at $47.29.

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