April 20, 2012

 

Canada's PotashCorp reveals industry's scale bet on demand revival

 

 

Showing inventories at their highest level since 2009 market collapse, PotashCorp revealed the scale of the industry's bet on a rebound in consumption of the nutrient.

 

Potash stocks held by North American producers, such as Agrium, Mosaic and PotashCorp itself, soared 274,000 tonnes last month to nearly 3.3 million tonnes, the company said.

 

The rise took inventories 49% above average levels and to the highest since late 2009, when the market was recovering from a slump in demand prompted by the world economic crisis and tumbling crop prices.

 

Indeed, last month's inventories came within 10% of the 2009 high, of more than 3.5 million tonnes, reached as weak demand caught producers unawares.

 

However, while some potash groups such as Mosaic and Potashcrop, and Russia's Uralkali, have announced some cutbacks to output this time, producers have voiced optimism that a downturn on demand which kicked in late in 2011, as crop prices fell, will prove a temporary blip.

 

Two weeks ago, Mosaic revealed its stocks had been rebuilt in the December-February period by a surplus of 730,000 tonnes in potash production, compared with sales.

 

Jim Prokopanko, the Mosaic chief executive, said: "During the quarter, we� positioned inventory to capture global demand as it emerges.

 

"We continue to expect near-record global shipments in 2012, and a very strong North American spring season."

 

PotashCorp will unveil its own quarterly data on April 26, with its first quarter results.

 

Hopes for demand have also been expressed in Europe by K+S, the German-based group, which last month said that "current pricing level for agricultural raw materials offers attractive income prospects for farmers, and should therefore lead to a positive development in fertiliser demand in those sales regions of relevance for us".

 

Russia's Uralkali last week said that it was "witnessing very good fertiliser demand" in Brazil, and forecast a "positive trend" in South East Asia and that "buyer activity in China will continue to be robust this year".

 

Indeed, China, the top potash buyer, surprised markets three weeks ago by agreeing a fresh supply deal, which had been expected to take far longer to thrash out. Expectations for fertiliser use in the US have been underpinned by forecasts for the highest sowings in 75 years of corn, a nutrient hungry crop, and a fast planting pace, which is expected to be confirmed in data later on Monday from the USDA.

 

Potash prices have yet to show any reaction to the rise in end-of-March inventories, finishing the month at about US$500 a tonne on the Vancouver spot market, a level around which they have spent more than a year, the PotashCorp report showed. The data also showed prices of nitrogen, rebounding back above US$400 a tonne in Yuhzny, Ukraine, which set a world benchmark price.

 

Phosphate prices, as measured in central Florida, fell further below US$500 a tonne, but the pace of decline, from nearly US$600 a tonne last summer, slowed amid a decline in inventories. Combined US inventories of monoammonium (Map) and diammonium phosphate (Dap), the main forms of the nutrient, fell 131,000 short tonnes last month from a level approaching 1.2 million tonnes, among the highest levels since at least 2007.