The collapse in potash prices has become so severe that plans for adding millions of tonnes of capacity from new mines may soon be put at risk, fertilizer giant K+S has said.

The German group, announcing a second quarter loss of E44.3m, slashed by 10m tonnes to 40m tonnes its forecast for global potash sales this year, from 54.8M tonnes in 2008.

The revision reflected the "continued weak global demand" for fertilizers, particularly in Europe, which would prompt potash miners to make further cuts to existing capacity.

"Potash producers will cut back output by about 14m tonnes in total," said K+S.

Prices, meanwhile, were "still scarcely possible to forecast", the group said, adding that it had been disappointed with deals last month to provide potash to India at $460 a tonne, below the $630 a tonne or so that many producers had been holding out for.

'Not economically feasible'

Any further drops in potash prices would force the suspension of new potash projects.

"The economic viability of time-consuming and very capital-intensive greenfield mines depends on a reasonable potash price level," K+S said.

"The realisation of new capacity at the low price level that stilled applied three or four years ago is not economically feasible."

BMO Capital Markets, the US broker, in February estimated that potash companies, including North American giants Agrium, Mosaic and PotashCorp, had plans to add 32m tonnes to output by 2017 through new mines and expansions to existing facilities.