Uralkali softened the blow of a downgrade to its forecasts for the world potash consumption by revealing "very strong demand" from Brazilian buyers, who have agreed prices far higher than those paid by China three months ago.
The Russia-based group, the world's biggest potash producer, said that the market had "returned to normal" since the start of the quarter, following a downturn in late 2011 and early 2012 blamed on lower crop prices and macroeconomic fears.
Signal purchases by China in late March had "encouraged buyers in other regions to step in the market more actively", a factor which, with European and North American growers undertaking spring fertilizer applications, had "depleted" inventories.
Indeed, Brazilian buyers had shown "very strong demand" buying 150,000 tonnes of potash at $550-560 a tonne, including freight, for immediate shipment, from Belarusian Potash Company, the consortium through which Uralkali markets its exports.
These sales which "will bring more confidence to the market", Uralkali said.
The price agreed with the Brazilian customers was above the $470 a tonne paid China's buyers in March, although Chinese purchasers, and the world's top importers, typically secure a discount.
Uralkali nonetheless lowered to 54m-56m tonnes its forecast for world potash consumption in 2012, reflecting the weak start to the year.
The estimate compared with a range of 56m-58m tonnes forecast two months ago, and a figure of no more than 57m tonnes unveiled by chief executive Vladislav Baumgertner last week.
The group estimated world potash deliveries at 51m-53m tonnes, compared with a forecast of up to 52m-53m tonnes from Mr Baumgertner last week.
With consumption ahead of deliveries, "we expect that at year end, potash inventories in major markets should be lower compared to the previous year", Uralkali said.
Tigher stocks are typically supportive of prices.
Mr Baumgertner added that, "over the medium term, we continue to have strong confidence in underlying potash market dynamics".
The weak start to the year was reflected in fall of nearly 20%, to 2.1m tonnes, in Uralkali's potash sales in the January-to-March quarter.
Slightly higher prices reduced the impact of the drop on revenues, which fell 11.8% to $901m.
"Macroeconomic instability led to buyer caution about buying accumulating stocks outside of application season," the company said, adding that in response it slashed by more than one-third, to 1.9m tonnes, potash production during the quarter, running at about 70% of capacity.
"With a steady market recovery, Uralkali returned to full capacity operation in May," Uralkali said.
Uralkali depositary receipts, a proxy for shares, stood unchanged at $35.65 in late deals in London.