* North American potash inventories up 152,000 tonnes
* Inventories are 115 pct above the prior 5-yr average
By Euan Rocha
TORONTO, July 16 North American potash
inventories continued to rise in June and are currently 115
percent above the prior 5-year average, the world's largest
fertilizer producer Potash Corp of Saskatchewan (POT.TO) said
Potash Corp said North American potash inventories rose by
152,000 tonnes in June.
Inventories of potash have risen steadily through the
course of 2009, despite major production cuts, as farmers
concerned by exorbitant pricing and hurt by the credit crunch
have deferred application of the key crop nutrient.
Potash, along with nitrogen and phosphate are the three
main macro nutrients used in farming across the globe.
While nitrogen- and phosphate-based fertilizer prices have
fallen, the price of potash has remained stubbornly high even
as demand has collapsed, as a small group of companies, which
control roughly 75 percent of global supply have slashed output
in an attempt to maintain pricing.
Roughly 40 percent of global potash production capacity has
been idled since the second-half of 2008, but despite tight
supply-side management, North American potash inventories have
risen steadily in recent months as global potash markets have
remained frozen since the end of 2008.
In a group of graphs posted to its website late on
Thursday, Potash Corp also indicated that potash spot market
pricing remained flat at about $700 per tonne in June.
The first concrete indication that producers are beginning
to cave on potash pricing came last month, when Germany's K+S
SDFG.DE said that high potash prices were "unsustainable"
given current market conditions. K+S cut both its pricing and
production at the time.
Further indications that the producers' hard line was
softening came last week, when Russia's Silvinit SILV.RTS
agreed to supply Indian importers with potash at $460 per
tonne, well below the current spot market price of $700 per
Analysts expect potash markets to thaw and demand to
pick-up again, once Indian and Chinese buyers sign annual
contracts with major suppliers like Canpotex and BPC, as these
contracts will set the floor on potash pricing and spot prices
will adjust accordingly.
Major suppliers like BPC and Canpotex are yet to sign
supply contracts with China, the world's largest potash
importer, this year. India is reportedly close to signing its
Belarussian Potash Corp, or BPC is a 50-50 joint venture
between Russia's Uralkali (URKA.MM)and Belaruskali. While
Canpotex is the potash marketing consortium of Potash Corp,
Mosaic Co (MOS.N) and Agrium Inc (AGU.TO).
These five companies along with K+S and Silvinit account for
roughly 75 percent of global potash supplies.
(Reporting by Euan Rocha in Toronto; editing by Carol