(This story appears as part of a special package
highlighting the global potash industry.)
* Expect flurry of orders after China potash deal settled
* Potash demand seen rebounding in 2010, growing thereafter
* Producers moving forward on capacity expansion
By Euan Rocha
TORONTO, Sept 23 After a long stand-off in
global potash markets, producers are getting ready for a
rebound in orders in 2010 and growing demand for the crop
nutrient in the years beyond.
High potash prices, weakening grain prices, tight credit
markets and buyer anxiety drove exports of the crop nutrient
down more than 70 percent in the first half of 2009, forcing
producers to idle more than 40 percent of capacity.
But a major contract with Indian buyers this summer and
signs of a drawdown in North American potash inventories have
made producers more hopeful. [ID:nN16156605]
"If you go around Central America, South America,
Malaysia, Indonesia, Australia, New Zealand, they are all
waiting to buy, they all know that they need to buy," said Bill
Doyle, chief executive of Canada's Potash Corp (POT.TO), the
world's No. 1 producer of the mineral.
Doyle said the Saskatoon, Saskatchewan-based company, which
has shuttered about 70 percent of capacity, plans to restart
its idled capacity gradually in the first half on 2010 as
Much still hinges on the world's largest potash buyer,
China, which has yet to sign its annual potash import contract.
That has left other buyers in limbo and created doubts about
where the price is headed.
"I think that China will really be an inflection point for
many people around the world to get moving," said Doyle, who
expects China to agree a contract in November.
Potash prices peaked at more than $1,000 a tonne at the
height of the agricultural commodities boom in 2008. They have
fallen to $460 a tonne since then, after India forced producers
into lowering prices this summer. [ID:nN13161464]
Prices could fall further if China can wrangle a more
favorable deal from suppliers, and many smaller buyers are in
no hurry to buy now, only to see prices fall later.
"A lot of people in the supply chain got caught when prices
fell, so they have a general reluctance of booking anything,"
said Mike Wilson, chief executive of Agrium Inc (AGU.TO), a
Canadian fertilizer maker and agricultural products retailer.
Producers and analysts say farmers can only defer potash
application for a year or two before crop yields suffer.
"While this is certainly a challenging time for the entire
industry, we have been taking advantage of it to progress our
investment program and address the tasks that couldn't be
completed when we were operating at full capacity," said
Vladislav Baumgertner, chief executive of Russian producer
Uralkali and its peers have been investing heavily in
expanding their operations even as demand fell.
Potash Corp's Doyle said the company's capacity expansion
plans are moving ahead. It plans to have 18 million tonnes of
annual installed capacity by 2012, up from current levels of
about 12 million tonnes. [ID:nN22302194]
Mosaic Co (MOS.N), a smaller rival based in Plymouth,
Minnesota, plans to raise its annual potash production capacity
gradually by about 5 million tonnes, from 10 million over 10
years. Agrium is looking to expand its annual capacity to 2.8
million tonnes from its current capacity of 2 million tonnes.
"We remain of the belief that this market will return into
2010 with strong purchases, 5 percent below the strong levels
of 2007," Canaccord Adams analyst Keith Carpenter said in a
note to clients.
"Furthermore, we expect 2010 to build-out constructively
into 2011, with 2011 being a stronger year on volumes than was
experienced in 2007."
(Reporting by Euan Rocha; editing by Janet Guttsman)