NA potash inventories swell, despite output cuts

Potash inventories held by North American producers such as Mosaic and PotashCorp closed 2012 at their highest, for a year end, since at least 2007 despite efforts to curtail supplies by cutting back output, as domestic demand flagged.

North American producers' stockpiles of the nutrient rose by 86,000 tonnes to more than 3.1m tonnes last month, data from PotashCorp showed.

The increase, in a period when inventories usually rise ahead of drawdown as farmers prepare for spring applications, was slightly lower than the typical increase, stemmed by capacity cutbacks by potash groups in an effort to match production better with demand.

 Output, at some 1.3m tonnes, was 27% lower in December than a year before.

Domestic sales  vs exports

Nonetheless, stockpiles ended the year 37% above the five-year average level, and at their highest for a year end since at least 2007.

The rise inventories, despite the production cutbacks, reflected a steep drop in domestic sales of the nutrient, which tumbled 34% to less than 500,000 tonnes, and to the lowest since February.

Exports more than doubled, to nearly 600,000 tonnes, if remaining a little below year-ago levels, helped by the sowing season in South America, a market which many groups have relied on for growth in the absence of contracts with top importers China and India.

China on Tuesday agreed a fresh import deal of up to 1.0m tonnes with former Soviet Union exporters, two weeks after sealing a 1.0m-tonne deal with North American producers.

'Negative' data

The potash data were termed "negative" by broker AltaCorp, although it said the slip was "not surprising, given that sales contracts with China have only recently been announced in the New Year".

Chinese deals, and in particular pricing, are viewed as setting a template for the rest of the industry.

"Investors should look beyond the December inventory data," AltaCorp analyst John Chu said.

"The important data points will be reflected in inventory levels for the new year."

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