December 30, 2011

 

Mosaic cuts phosphate output due to lower market demand

 

 

Mosaic, the US based biggest phosphate fertiliser group cuts its phosphate output because of the downturn in fertiliser demands.

 

Mosaic said it would cut output by up to 250,000 tonnes over the first three months of 2012, reflecting oversupply of the nutrient in the domestic market.

 

"As dealers and distributors focus on the macroeconomic uncertainty and delay purchases for the North American spring season, near-term supply of phosphate barges on the Mississippi River has exceeded near-term demand," Jim Prokopanko, the Mosaic chief executive, said.

 

The cutback is the latest in a series of signs of global economic worries, reflected in a correction in crop prices since early September, feeding through into fertiliser demand.

 

A series of companies, including Germany's K+S, Canada's PotashCorp and Russia's Uralkali, have highlighted softness in some parts of the potash market.

 

Potash inventories held by North American producers jumped by 400,000 tonnes last month to return to above-average levels.

 

However, it is in phosphates that many observers are most downbeat, thanks to capacity additions in the Middle East besides broader demand hiccups.

 

Indeed, this appears to have been borne out by reaction to an Indian request to cut prices of deals for fertiliser supplies, with phosphate exporters agreeing to renegotiate terms, unlike the big potash cartels North America's Canpotex and the Belorussian-Russian BPC.

 

However, Prokopanko remained upbeat about phosphate prospects, saying weakened spot prices for the nutrient "do not reflect our outlook for the business, nor do we think they are sustainable".

 

"We continue to expect an above-average application season in North America and record-setting global demand for both phosphate and potash in 2012.

 

"We are confident strong farmer economics and agricultural fundamentals will ultimately prevail over the near-term cautious sentiment."

 

The cut in output of 250,000 tonnes equates to about 10% of production for the quarter. Mosaic sold nearly 12 million tonnes of phosphate in its 2010-11 financial year, which ended in May.

 

In the 2008-09 financial year, when the global recession crushed fertiliser demand and prices, Mosaic's phosphate sales volumes plunged by 31%.

 

Mosaic shares closed down US$0.01 at US$50.82 in New York.