Potash use 'beating output capacity' - PotashCorp

PotashCorp lifted its hopes for full-year profits as it forecast that a clamour for potash, which sent second-quarter earnings soaring 75%, will last into 2012 and could lead to demand outpacing supplies.

The Canada-based company, the world's biggest potash producer, raised its forecast for full-year profits to $3.40-3.80 a share, from $3.00-3.40 a share.

Farmers' desire to raise crop yields and take advantage of elevated prices was "driving strong demand for all three [major] nutrients, especially potash", the group said.

"Even with uncertainty around macroeconomic issues weighing on equity markets and investors' tolerance for risk, the strength of agricultural fundamentals continues to provide a highly favourable environment for our business."

Supply deficit?

Indeed, demand for potash could potentially drive see it exceed the industry's output capacity.

"We continue to estimate global demand will approximate 55m-60m tonnes in 2011, but now anticipate that meeting the upper end of the range will be constrained by... the industry's ability to produce," said the group, flagging scheduled shutdowns ahead at some of its own operations.

The potential shortfall, evident in stocks which were among North America producers 26% below average levels, was only whetting further demand from many countries.

"Many potash buyers globally are recognising the tightness of world supply and are moving to secure product a trend that we expect to continue in 2012," the group said, lifting estimates for industry sales in Latin America and South East Asia.

Even India, which is holding out against the high prices fostered by the production squeeze, will be forced back to buying by a drop in its stocks to "critically low levels".

"With its pressing need to increase crop productivity and restock depleted inventories, we expect significant Indian demand requirements in 2012," the group said.

'Aggressive buying' 

The price PotashCorp gained for its potash soared by one-third, year on year, to $416 a tonne in the April-to-June quarter, driving the group's sales of the nutrient above $1bn.

"Key spot-market potash buyers moved aggressively to secure sufficient volumes to [fulfill] immediate needs," the group said.

Helped by phosphate sales up 76% at $593, and takings from nitrogen fertilizers one-third higher at $549m, the performance saw group revenues soar 62% to $2.33bn.

Earnings came in at $840m, equivalent to $0.96 a share, ahead of Wall Street expectations of a $0.86-a-share result. Nonetheless, PotashCorp shares closed down 0.1% at $59.10 in New York.


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