HOUSTON (ICIS)--Despite some lingering concerns from the fallout last year in the global potash market, PotashCorp said on Thursday that it is anticipating that there will be a strong rebound in demand in 2014 for the crop nutrient.
Speaking during a Q1 2014 earnings conference call, the Canadian producer said that it believes the market conditions are in place to support its estimate for global potash shipments of 55m-57m tonnes in 2014. The producer also said that its projection to lower production costs by $15-20/tonne remains on target.
“In North America, we anticipated a strong rebound in demand this year based on our first quarter shipments and second quarter book,” said Bill Doyle, PotashCorp CEO. “Operationally, we continue to make meaningful strides in our potash business. Our costs have already begun to move lower, and we remain on track to achieve our target reduction of $15-20 from 2013 levels.”
Doyle said that one of the biggest challenges is the backlog in deliveries due to an extended winter and limited availability in traditional shippers such as railroad companies, who have been overwhelmed with not only fertilizer demands but pressing needs of crude oil and grain shipments.
“A delayed start to the spring planting season has provided some relief for producers trying to keep up with shipping demands amidst real challenges. The situation is improving, but there is still a significant amount of product that needs to move, and we working diligently with our transportation partners to meet our customers’ needs in timely manner,” Doyle said.
PotashCorp expects its share of the Canpotex allotment increase to above 53% for H2 2014 and expects to wrap up a successful Canpotex allocation run by early next week.
Questioned over the prospect for overall global potash demand growth, Doyle said that the potash segment needs to be viewed from a long-term perspective but that an estimate of 1.5% annual growth is not in line with the company's viewpoint. He said that the more acceptable trend line is 3%, with company expectations to surpass that.
“If you think about the last 10 years and you take growth prospects over the last 10 years, I think, it leads you to think that growth would be permanently retired,” Doyle said. “We don’t see it that way. We think it is a long term. You go back to 1960 and that trend line is much closer to 3%.”
“I think that you’ll see a rebound," he added. "This year we are going to be 5% up, so that’s more than 1.5% there. What we think is it is going to be a stronger market for overall growth in 2015. We think we have some growth years coming ahead of us, because you got to get back to trend line. And so if you look at that long-term trend line, it might give you a different perspective on growth.”
In terms of whether Uralkali and Belaruskali will come back to some sort of marketing agreement, Doyle said that it makes the most sense for both sides to reunite. The question is, how soon can they resolve their differences and move forward, he said.
“Look at the results. You had a strategy that was revenue maximisation for Uralkali, and if you look at their year last year, revenue was down 16%. So that’s not revenue maximisation. And then the earnings were down 58%. I mean, it speaks for itself - the facts are there,” Doyle said.
Thursday was Doyle's last PotashCorp earnings call as CEO, and he took the opportunity to praise the company and employees for their performance and to commend the selection of Jochen Tilk as new chief executive beginning July 1. Doyle will remain with the producer as a senior advisor until June 2015.
“I firmly believe our companies brightest days are just ahead," Doyle said. "We have outstanding people, world-class assets and the right strategies to be successful in any environment.”