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Potash price stabilises as Canada, US demand soars

The tumble in potash prices in North America showed growing signs of bottoming out amid a sharp fall in inventories, as strong consumption within the region offset some softness in export demand.

Potash prices, as measured in the benchmark export market at Vancouver, have held at $300 a tonne for a third successive month, data from Canadian fertilizer giant PotashCorp showed.

While below levels above $400 a tonne before Russia's Uralkali in July broke up the Belarusian Potash Company cartel, and sent world prices tumbling by ditching a strategy of constraining sales volumes, the stability tallies with talk from fertilizer groups of recovering market conditions.

Prices of nitrogen and phosphate fertilizers - which also suffered late last year as a stand-off in potash markets, as buyers awaited to see how far prices would fall, spread to other markets have enjoyed substantial recoveries in 2014.

Values of diammonium phosphate, a major phosphate nutrient, have risen by more than one-quarter at the key US export port of Tampa to roughly $500 a tonne.

Strong domestic appetite

The stabilisation in potash prices was supported by strong North American potash sales, which rose 50% last month from March 2013 to 993,000 tonnes, the PotashCorp data showed.

That continued a strong trend, with first quarter sales, at 2.82m tonnes, up 48% year on year and the highest for a January-to-March period since 2010.

Indeed, coupled with a decline in production of 11.9% year on year, the decent North American demand helped shrink the region's producers reduce their inventories to 2.87m tonnes.

While stocks often decline at this time of year, as spring sowings and crop dressing programmes encourage consumption, the 9.9% year on year reduction in inventories is sizeable by recent standards, the biggest since October 2011.

Export competition

The PotashCorp data, however, underlined some softness in North American potash exports, which at 968,000 tonnes were down 23% year on year in March.

Many producers have pulled back expectations for potash use this year, despite the lower prices, with the weaker crop values until recent weeks viewed as depressing sentiment.

Russian giant Uralkali last week cut to 56m-58m tonnes, from 58m-60m tonnes, its forecast for world potash demand this year, although still representing a rise of some 3m-4m tonnes year on year.

However, the North American export data also appear to support Uralkali's claim last week that it had recovered significant market share since ditching "price over volume" strategy in favour of maximising revenues.

Uralkali said that its share of world potash exports, which fell to 17% in the first half of last year, had recovered to historic levels of 23%.

This improvement had come largely at the expense of the major North American shippers, Agrium, Mosaic and PotashCorp, whose market share had fallen from 32% to 27%.

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