Two major potash producers last week announced further curtailments ?Çô Canada’s PotashCorp and Germany’s K+S Group, with K+S also announcing a cut in domestic prices.
PotashCorp on June 16 indicated a further reduction in 2009 potash production of 800,000 mt, bringing PotashCorp curtailments this calendar year to 4.7 million mt and total curtailments to 5.5 million mt since August 2008.
Lagging demand due to an extremely slow U.S. spring season and extended negotiations with offshore buyers are the reasons behind the shutdowns. However, with the world’s soils and supply chain nearing depletion after almost a year of deferral, it said it expects demand to return in second-half 2009 as Brazil approaches its major application season and India and China inevitably return to the market.
PotashCorp said this unprecedented period of draw-down throughout the supply chain, coupled with the expectation of lower global crop production and higher crop prices, is expected to lead to an even stronger rebound in 2010.
The PotashCorp announcement is just the latest supply news as producers negotiate with buyers in China and India. PotashCorp announced a 400,000 mt curtailment on May 20 (GM May 25) as the industry headed into the IFA Conference in Shanghai, where negotiations with the Chinese and Indians were to get underway. Just last week, PotashCorp said that this fall Canpotex, the Saskatchewan producer export organization, would discuss switching sales to China to spot from contract (GM June 15, p. 1). Initial hopes had been that negotiations might be completed by the end of June; however, those have now been pushed back into July and could lag into August (GM June 15, p. 14).
Despite the curtailments, PotashCorp President and CEO Bill Doyle has remained upbeat that exports and North American consumption will pick up in the second half (GM June 15, p. 1).
K+S on June 17 said it plans to reduce potash production in the second half of 2009 by up to 2 million mt, following a reduction of 2 million mt in the first half. Moreover, K+S said it has noted on major overseas markets that a price of US$735-$750/mt is currently unsustainable for large quantities. Instead, K+S said indications are for lower price levels. As a result, in Europe the company has implemented a price cut from E555 (US$770.69/mt) to E435 ($604.06/mt). K+S said it has already forecast a tangible fall in revenues and a significant fall in earnings for 2009, with further significant reductions expected in the current financial year. These will appear with the release of earnings Aug. 13.
K+S said European agriculture exercised great restraint in the use of potash fertilizers in the spring, and despite the stabilization of agricultural prices, the demand for fertilizers is expected to remain low in the second half. It said there is still no sign of any significant upturn in demand in Europe. Until now, K+S expected that the demand for potash and magnesium fertilizers would normalize in the second half of the year and that total sales would be just under 6 million mt of goods. However, in view of the extraordinarily weak sales, K+S has reduced its sales expectations for 2009 to 4.0 to 4.5 million mt.