March 17, 2009 / 4:09 PM / 10 years ago

UPDATE 2-Potash Corp further curtails potash production

* To cut potash production by 1.5 mln tonnes

* Still expects strong rebound in second half

* Jobs of 940 employees to be temporarily affected

* Shares close up 2.7 pct on Toronto Stock Exchange (Adds details on jobs affected, share price move, by-line)

By Euan Rocha

TORONTO, March 17 (Reuters) - Potash Corp of Saskatchewan POT.TO, the world’s largest fertilizer producer, plans to further curtail potash production after recent industry data showed that North American potash inventories have risen.

The output cuts reflect a continuing near-term drawdown of inventories as customers work through stockpiles built up before the global economic crisis hit, Potash Corp said in a statement posted to its website on Monday.

The company said it plans to reduce 2009 potash production by an additional 1.5 million tonnes, bringing the total expected curtailments of operational capacity this year to at least 3.5 million tonnes.

Potash Corp said it still expects a strong rebound in potash demand in the second half of 2009 that should continue into 2010.

The latest data from the Fertilizer Institute indicates that potash inventories at North American producers are 42 percent higher than the previous five-year average. At the end of February, they were 110,000 tonnes higher than the month before.

North American potash shipments in both domestic and export markets were nearly nonexistent in February, down 80 percent from the year-earlier level to another record low of 200,000 tonnes, Bank of America/Merrill Lynch analyst Steve Byrne said in a note to clients.

In a separate research note, BMO Capital Markets analyst Edwin Chee lowered his 2009 and 2010 earnings estimates for Potash Corp and also cut his share-price target for the company.

The new round of production curtailments will affect about 940 workers at the company’s Lanigan, Allan and Rocanville mines in Saskatchewan, a company spokesman said.

Only about two-thirds of the 940 employees will be temporarily laid off, while the remainder will be recalled to handle maintenance-related functions.

Potash Corp has about 5,300 employees across the globe, with a little less than half of those based within Canada.

Many of the impacted employees had already been out of jobs for the last eight weeks, due to the company’s initial round of potash production curtailments, which were announced in December.

The temporary lay-offs at Rocanville will last for four weeks, while those at Allan and Lanigan will be in place for another eight weeks, the company spokesman said.

Shares of Potash Corp closed up C$2.56 at C$98.98 Tuesday on the Toronto Stock Exchange. ($1= $1.2686 Canadian) (Reporting by Euan Rocha; Editing by Peter Galloway)

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