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Potash fears stoked by news from three continents

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The worries over the potash market were stoked from news on three continents, as data showed North American inventories rising, while Israel-based ICL and Chile's SQM flagged cautions over the market.

Patricio Contesse, the SQM chief executive, said that the Santiago-based potash and chemicals group, while achieving a 15.2% rise to $165.2m in earnings in the July-to-September quarter, faced a "a new set of challenges for the next months",

These included negotiating a "potash price environment [which] has been relatively unstable in the past weeks and difficult to predict for the near future".

Demand in South America "remains stronger than markets such as India and China, where recent developments show that demand has been weakening", the group said, following a long list of companies to warn over the impact of the top importing countries delaying on fresh purchase contracts.

Potash producers including Canada's Agrium and PotashCorp, Germany's K+S and US-based Mosaic have cautioned over the hit to the market from the hold out by Chinese and Indian buyers for lower prices.

'Significantly reduce shipments'

Separately, ICL, which has managed until now to underpin its potash sales volumes thanks to deliveries of a postponed Indian contract and strong shipments to Brazil, said that it was losing its resilience to the impact of the talks.

Completion of the group's outstanding contracts, "and the delay in the new contracts in India and China is expected to significantly reduce [potash] shipments in the October-to-December quarter compared with the [same] quarter of 2011," ICL said, if noting some pick-up in the phosphates market.

Demand in India, also a major phosphates importer, has seen a "significant increase" from a period weakened by a late monsoon, "and the market has stabilised following the start of rains".

ICL saw its operating profits from potash fall 12.2% to $314.0m in the July-to-September period, on revenues down 6.4% at $657.1m, depressed by lower selling prices.

Operating profits in phosphates dropped 7.7% to $51.6m, on revenues down 4.4% at $438.0m.

'No signs of a meaningful rebound'

The data followed the release of data from PotashCorp showing North American potash producers efforts to trim inventories coming unstuck, with stocks rising by nearly 170,000 tonnes last month, after four months of decline.

While an increase in October is not unusual, as demand wanes following the height of the autumn fieldwork period, the revival in inventories increased to 43% their standing above average levels.

There is "still no signs of a meaningful rebound for potash" demand, AltaCorp managing director John Chu said.

"We view the data as bearish for the potash sector. Despite indications of strong demand conditions in North America from a larger window for fall fertilizer applications, higher month-on-month inventory levels suggest that demand is sluggish."

By Agrimoney.com

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