HOUSTON (ICIS)--Looking towards 2014 as an opportunity to rebound, PotashCorp said on Thursday it believes conditions are in place that could support record global shipments of 55m-57m tonnes of potash.
Speaking during a Q4 2013 earnings conference call, PotashCorp CEO Bill Doyle said despite the recent downturn in the potash market, the fertilizer producer now sees a landscape that underpins growth in global fertilizer consumption even with the recent decline in commodity prices for key crops like corn in the US.
“At Potash we believe this environment is helping lift the clouds of uncertainty impacting global markets. As farmers around the globe look ahead to the upcoming growing season, purchasing activity is strengthening,” said Doyle.
Doyle said that shipments through the first half of 2014 are expected to outpace the same time period from the year prior and that for the full year it is calculated that company sales will be 8.2m-8.6m tonnes.
It is estimated that by optimizing production the company could lower its production cost by $15-20/tonne from 2013 and offset short-term weaker pricing.
Key to a true revitalization of the global potash market are the supply and demand issues involving China and India. PotashCorp estimates that China will require 11.3-11.7m tonnes in 2014 while India should be expected to fall in a range of 3.7m-4.2m tonnes.
Growing sentiment is that China has come close to reaching its capacity for producing enough fertilizers domestically and will rely more heavily on imports going forward. The demand is evident, company officials said, noting that China has the second largest population of undernourished people in the world with about 11% of its citizens facing the lack of adequate food supplies.
“Longer term we are confident that significant agronomic needs, coupled with the belief that China’s future domestic production capability growth is relatively limited, will drive increased import requirements. We believe this scenario could begin to play out in 2014, given improved economic motivators,” Doyle said.
“Our own contacts there in China say that long-term China is going to be 75% dependent on imports and I think that bodes well for our future.”
He said when viewing India the company has adopted a more conservative approach to predicting as quick of a rebound due to the political situation and the current policy of offering subsidies on urea but not for potash or phosphate.
“We are not so optimistic about India in the short term but in the medium term India is going to have to address their economic problems in the soil nutrient depletion,” Doyle said.
“In the next two to three years India is going to rebound. You could see India back up above the levels it was before, up above the 6 million tonne level. They just have a crying need to address soil fertility balances.”
PotashCorp President of Sales Stephen Dowdle added that although India used to have a formal contract period, that arrangement is fading in importance within the country and that it could eventually evolve into more of a spot market situation.