| WINNIPEG, Manitoba
WINNIPEG, Manitoba Potash warehouses are almost
empty amid strong demand for fertilizer, but a strike at three
Canadian mines, which account for about 6 percent of world
production, has not raised prices for the crop nutrient,
Even if the strike continues for a couple of months at the
mines owned by Potash Corp of Saskatchewan (POT.TO), prices for
the mineral would probably rise only moderately, said Lisa
Smith, senior potash analyst at consultancy Fertecon Ltd.
"I think another sharp spike is highly unlikely," Smith
said in an e-mail interview.
About 500 members of the United Steelworkers union, who
argue they deserve a bigger share of Potash Corp's record
profits, walked off the jobs six weeks ago at the mines, which
account for about 30 percent of the company's output.
Potash prices are already at a record $1,000 per tonne in
many markets, more than double levels of early 2008, Smith
said. The prices have stayed firm even as other fertilizers
softened, she said.
"If force majeure is issued on exports (from Canada due to
the strike), we could see other suppliers raise prices on new
spot business, but these hikes will be moderate," Smith said,
forecasting prices would end the year at $1,100 a tonne.
Record prices for grain have spurred fertilizer sales as
farmers look to maximize yields.
Until now, the strike has taken place during a seasonally
slow period in the fertilizer market, said Keith Carpenter, an
analyst with Canaccord Adams, who noted non-unionized staff
continue to pull some potash from the largest of the affected
Potash Corp has released no details about how much it can
produce during the strike, and has declined to comment directly
on whether it has been able to fill all its fertilizer sales.
The company also declined to comment on fertilizer trade
publication reports that it has bought supplies from a Russian
competitor to fill sales.
"We continue to work with all of our customers to meet
their supply needs," said Potash Corp spokesman Bill Johnson.
"Would some customers like to buy more tonnes than we can
currently sell them? Probably yes. But it was a tight market
before the strike," he said.
Carpenter said he assumes the strike will end before 2009.
"At that point, if the strike would go on, we would expect
it to put added (upward) pressure to those prices, but nothing
like we saw over the past year," said Carpenter, who forecasts
prices of $1,200 a tonne by the end of 2009.
"If we just assume a three-month strike ... it is a blip to
the company in the grand scheme of things," he said.
Potash Corp shares were up 10 percent at C$184.40 at the
Toronto Stock Exchange on Friday as stock markets rallied after
governments moved to shore up shaken financial markets.
Potash Corp is the largest producer in the sector and has
long tried to manage supply to meet demand, and to provide
Potash supplies are so tight that a case could be made to
charge as much as $5,000 a tonne, the chief financial officer
of Potash Corp said earlier this week.
But Wayne Brownlee said a big price hike would knock
consumption lower and make prices more volatile.
"We want this to defy gravity, and we want this to be
completely different from other commodities, and that means
that when we have price increases, we want them to stick,"
Brownlee told a Credit Suisse investor conference.
(Reporting by Roberta Rampton; editing by Rob Wilson)