* North American potash inventories up 152,000 tonnes
* Inventories are 115 pct above the prior 5-yr average
By Euan Rocha
TORONTO, July 16 (Reuters) - 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 on Thursday.
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 tonne.
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 supply agreements.
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 Bishopric)