Potash Corp expects robust demand through 2008

WINNIPEG, Manitoba, Sept 18 (Reuters) - Potash Corp of Saskatchewan POT.TO, the world's largest potash producer, sees tight supplies amid strong demand for the fertilizer in the coming year, its chief financial officer said on Tuesday.

“Our customers right now are on allocation. We’re having a hard time meeting demand in 2007,” Wayne Brownlee told analysts at a Bank of America investment conference in San Francisco.

“We expect that allocation process is going to continue in 2008, and even into 2009,” Brownlee said, noting potash buyers currently have to wait about two months longer than usual to receive fertilizer because of strong demand.

The world’s top fertilizer company by capacity and stock market value, Potash Corp has capitalized on soaring demand, he said.

As the middle class grows in China, India and Brazil, so has meat consumption, boosting the need for crop fertilizer to improve grain yields for livestock feed, he said.

The expanding biofuel sector has also raised demand for crops, Brownlee said. Tight world grain supplies have pushed grain prices to record levels, motivating farmers to apply more fertilizer, he said.

Potash Corp owns more than 75 percent of the world’s idled potash capacity, which the company is moving to bring on line.

The company aims to produce 15.7 million tonnes of the fertilizer by 2015, up from about 10 million tonnes in 2006.

Potash projects gross margins will more than double as it expands, Brownlee said.

But competitors may shy away from building new mines because it costs more than $2 billion and takes seven years to see the returns, Brownlee said.

“So when you’re making a bet on a potash greenfield mine, you’re really betting on what the prices of potash are going to be in years 8 through 15 to get your return on that investment of over $2 billion,” he said.

Potash stock was up 1.32 percent, or C$1.21, at C$93.09 on the Toronto Stock Exchange on Tuesday and was up 1.86 percent, or $1.68, at $91.03 on the New York Stock Exchange.

$1=$1.02 Canadian