Uralkali sounded an optimistic note on the potash market, even as it acknowledged the "unbalanced" conditions which have prompted a 13% slump in deliveries in 2012, and prompted it to leave half its capacity on ice.

The Russian potash giant said historically high crop prices, and "strong farm economics", were "providing strong support for positive market momentum during 2013.

"We hope that positive crop dynamics that we are observing now will provide for a significant rebound in the potash demand next year," Vladislav Baumgertner, the Uralkali chief executive, said.

Brazil, where a rush to cash in on strong crop prices is driving farmers to boost sowings and yields, "is expected to be a major demand driver in the beginning of 2013", the group said.

"Farmers are eager to buy fertilizers as soybean prices are high." While soybeans meet their own nitrogen needs, they require phosphate and potash to maximise yield prospects.

'Increased cautiousness'

However, Mr Baumgertner cautioned that the potash market had ended 2012 with an "unbalanced supply and demand situation", which had been behind Uralkali's announcement two weeks ago that it was to cut its capacity utilisation to 50% in the December-to-March period.

Indeed, Uralkali estimated world shipments in 2012 falling some 13% to 48m-49m tonnes, a far cry from the volume increases that many potash groups had hoped for at the start of the year.

German rival K+S last month cut its estimate for industry potash sales worldwide by 2m tonnes to 54m tonnes, which on its methodology would represent a 10% decline on the 2011 result.

The slowdown in shipments this year reflected in part 2011's strong performance, which left "significant stocks", and "unfavourable weather conditions" in many countries, said Uralkali.

India's late monsoon, for example, "increased cautiousness among farmers about purchasing fertilizers".

China, India prospects

However, a big part of the market downturn has also been attributed to a failure by China and India, the top potash importers, to agree new contracts, holding out for lower prices.

A deal by potash exporters with India "is expected to be concluded at the beginning of the first quarter of 2013", Uralkali said.

"Indian farmers have been disproportionally applying large volumes of heavily-subsidised nitrogen fertilizers… while potash and phosphate consumption has dramatically declined leading to a huge disbalance in the nutrient content of the soil."

India's potash inventories are also believed to have run low, with some estimates pegging them at 400,000 tonnes, less than a month's supplies at historical levels of application.

While China's stocks are seen as considerably larger, Uralkali said that "inventories are expected to decline over the next three months due to a seasonal suspension of domestic production and a halt in rail imports.

"We believe China will look to begin renegotiating a new contract in February 2013."

'Buyer caution'

Uralkali itself sold 2.5m tonnes of potash in the July-to-September quarter, down more than 10% year on year and behind production, which fell 10% to 2.6m tonnes.

The reduced sales, behind a drop of 12.3% to $1.06bn in revenues for the period, "reflected buyer caution across the global potash market reflected in a slowdown in new orders due to inventory drawdown".

Uralkali depositary receipts, a proxy for shares, gained 0.2% to  close at $39.99 in London.

The group's comments follow data released by Canadian rival PotashCorp showing North American potash inventories soaring by more than 20% last month, returning above 3.0m tonnes, deepening concerns over the imbalance between production and demand.