February 6, 2012

 

Mosaic to cut potash output by 20%

 

 

Mosaic will reduce production of potash, by 20% in the February-to-May period.

 

In December, the company revealed temporary cutbacks in phosphate output.

 

The continued downturn in fertiliser markets, evident in waning price forecasts, has prompted the US fertiliser giant to join peers in mothballing capacity to better match output with weakened demand.

 

The cutback equates to about 440,000 tonnes in deferred production, to judge by operating data for the same quarter last year.

 

PotashCorp and Uralkali, the top two potash producers, have already curbed output of the nutrient because of a downturn blamed macroeconomic uncertainty which, besides causing unease in agriculture as in other industries, undermined crop prices in the last few months of 2011, stemming farmers' profit hopes.

 

PotashCorp has ordered temporary shutdowns at mines responsible for about 10% of its capacity, with Uralkali unveiling a target for full-year output of 10.5-10.8 million tonnes, some 8% down on-year.

 

"Cautious dealer sentiment continues to delay purchases and lower near-term demand for potash," Jim Prokopanko, the Mosaic chief executive, said. "We've taken steps that reflect the near-term supply and demand balance for potash."

 

The comments echo those in late December when blamed phosphate curtailments on a decision by dealers and distributors to "focus on the macroeconomic uncertainty and delay purchases".

 

However, Prokopanko on Friday (Feb 3), as in December, was upbeat over prospects, saying that was "confident" that fundamentals of weakened crops supplies "would prevail" in spurring orders. "Farmer economics remain strong, and we continue to expect an above-average application season in North America and record-setting global potash shipments in 2012."

 

The slowdown in potash orders saw inventories of the nutrient held by North American producers soar more than 400,000 tonnes to 2.5 million tonnes in December, their highest for nearly two years.

 

A series of potash groups have cut outlooks for the market, most lately PotashCorp which last week, unveiling earnings short of analysts' forecasts, cut to 55-58 million tonnes, from 58-60 million tonnes, its forecast for industry potash sales worldwide this year.

 

Other nutrient groups which have unveiled production cutbacks include PhosAgro, Russia's top phosphates group, which said it would cut output of MAP and DAP, the main phosphate fertiliser products, by 18% in the first three months of 2012, compared with the same period last year.

 

"We expect that farmer economics and agriculture fundamentals will support higher prices and higher demand for these fertilisers ahead of the spring planting season," Maxim Volkov, the PhosAgro chief executive, said at the time, dismissing declines in values of the nutrient as "speculative".

 

Mosaic shares closed 1.1% higher at US$57.41 in New York.