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The clouds are parting over the global potash market, the world’s largest producer of the crop nutrient says.
After four consecutive quarters of falling profit, Potash Corp. of Saskatchewan said Thursday it’s seeing higher sales to China, Latin America and India as customers are lured back by low prices after a buyers’ strike last year.
“We believe we are in a recovery year this year,” Bill Doyle, the ever-optimistic chief executive officer of Potash Corp. and the industry’s most vocal champion, said on a conference call with analysts on Thursday. “The impact was evident in our first-quarter earnings.”
Global potash demand slumped hard last year as key consumers in India and China delayed signing new contracts with producers for months, resisting high prices for the nutrient used to strengthen plant stalks against drought and disease. The impasse ended in December when Canpotex Ltd., the joint venture of Potash Corp., Agrium Inc. and Mosaic Co. that sells potash outside of North America, agreed to significantly lower-priced long-term contracts.
The recent pick-up in sales volumes signals healthy global demand for potash. But the industry profit bonanza of several years ago won’t return until the global economy gains pace and producers can secure higher prices.
“A holiday in potash demand is now over and we’re starting to see the consumption on the volume side pick up again,” said John Hughes at Desjardins Securities in Toronto. “Those that need potash have certainly stepped back into the market in the first quarter of this year relative to the fourth quarter and certainly the first quarter of last year.”
For the first quarter, Potash Corp. said it shipped 2.2 million tonnes of potash, compared to 1.2 million tonnes in the year ago period. Those figures helped drive first-quarter earnings to $556-million (U.S.) or 63 cents a share, above estimates and well above the $491-million, or 56 cents in the first quarter last year.
“The higher-than-expected earnings were mostly attributable to higher potash sales volumes and better earnings from equity investments,” Adam Schatzker, an analyst with RBC Dominion Securities Inc., wrote in a report.
Potash Corp. said sales in North America nearly doubled in the first quarter and were up 70 per cent in the rest of the world. Mr. Doyle said Canpotex shipments of potash to Brazil hit an all-time monthly high in March.
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