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World potash demand to rebound by 10% in 2014

World potash consumption may bounce by more than 10% next year, supported by a drop in prices to multi-year lows following the break-up of the Belarusian Potash Company cartel, Uralkali said.

The Russia-based group, the world's biggest potash producer, lifted to 58m-60m tonnes, from 56m-57m tonnes, its forecast for world consumption of the fertilizer in 2014.

The upgraded figure, which compares with use of 53m-54m tonnes expected for this year, reflects a drop in potash prices to their lowest since at least 2009 - to below $350 a tonne in Brazil, South East Asia and New Orleans - after Uralkali in July quit the BPC consortium which controlled more than 40% of world trade.

"Competitive prices… will drive potash demand growth in 2014," said Uralkali, which described it new strategy as "prioritising volumes or prices, depending on the market situation", rather than the "price over volume" idea followed by the cartel.

'Demand is gradually recovering'

Already weaker prices, down from levels of $550 a tonne or so reached in mid-2011, had encouraged consumption.

"As potash became more affordable for lower income farmers, and inventories are depleting, we see that demand is gradually recovering," Oleg Petrov, the Uralkali head of sales and marketing, said.

And demand is expected next year to prove particularly strong in Brazil and South East Asia, besides in India and in China, the top importing nation, whose moves in the market are particularly closely watched, as its import deals set price benchmarks for other buyers.

Although Chinese potash imports in the first nine months of the year were, at 4.8m tonnes, down 800,000 tonnes year on year, the impact is being felt on inventories, which Uralkali expected to tumble 1.4m tonnes to 3.5m tonnes over the full 2013.

In the US, the need to replenish soil nutrient levels after bumper harvests will spur "very strong" potash demand next year, while Europe will see a "strong market rebound" in the first quarter of 2014.

Industry cutbacks

The upbeat comments contrast with more cautious outlooks from some of Uralkali's rivals, with Canada-based PotashCorp earlier this month revealing it was to axe 18% of its workforce, leaving its potash operations to be "staffed to run at a reduced level for the foreseeable future".

US-based rival Mosaic last month unveiled the closure of a US potash mine, and the exit from fertilizer distribution businesses in Argentina and Chile, in response to "cautious" market behaviour.

Germany's K+S, flagging "considerable uncertainty" in the potash market, has unveiled a $670m cost-cutting drive.

Concerns have also grown over the viability of some potash expansion plans, and indeed Uralkali said that "lower potash price should promote rational decision-making in relation to greenfield projects", while viewing its own expansion plans as "cost effective".

World potash capacity has grown 3% over the past decade, compared with a 0.9% annual rise in consumption, the group said.

Uralkali impact

However, Uralkali too revealed a dent from the market downturn, unveiling revenues down 19.2% at $856m for the July-to-September period, as a small rise in volumes failed to make up for a tumble in prices.

The average sales price for potash exports tumbled 27% year on year to $272 a tonne, with domestic supplies achieving $192 a tonne, down 15.8%.

The group claims it is shielded from the price downturn by "the most attractive cash costs in the sector".

Uralkali shares stood 0.6% higher at 170.09 roubles in afternoon deals in Moscow.

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