Mosaic cutting potash rates while predicting market rebound

16 July 2013 23:45  [Source: ICIS news]

HOUSTON (ICIS)--Mosaic will operate its potash mines at less than 75% capacity to allow for planned maintenance and cutbacks at its facility in Colonsay, Saskatchewan, the fertilizer producer announced on Tuesday.

The capacity rate is down from 95% in the last quarter, and the company said during its fiscal Q4 earnings conference call that it may curtail output at other operations if demand continues to lag as it has in past month.

Despite the decline, Mosaic CEO James Prokopanko said he believes the market will rebound in part because of persistently favourable agricultural conditions.

“Just to put it in context, the way I think about it is, we have seen 2012, globally 2013, the pie hasn’t been growing. It's pent up demand that’s out there. It should be growing to produce the food the world needs. But the pie hasn’t been growing. At the same time, our appetites for a slice of the pie has increased with expansion,” Prokopanko said.

“And it's, I think just a transient situation," he added. "We are going to pass through this that the pie is going to start growing again. The extra capacity we have brought on is going to be eaten up, and we will be back in the situation of good market demand. Grain prices still are good. Farm economics still are good. The demand is there for it. It will come.”

Prokopanko said the current stagnation is the industry reaction to the weak demand, which explains in part the curtailments of brownfield projects and the uncertainty regarding any greenfield plans. He said companies such as Mosaic are becoming more resolved to match the level of demand in order to achieve favourable economic returns.

“We've just completed some and had some extended turnarounds in our other facilities, and it will balance. I'm not overwrought about there being too much product hitting the North American market. And the product that’s in North America, it will first displace the imported product that has been coming to the country, coming into North America for the last two years,” Prokopanko said.

By: Mark Milam
+1 713 525 2653

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