Global Fertilizer Outlook - 1

JACKSONVILLE, Fla. (DTN) -- Potash prices and shipments are down in 2015, thanks to several factors, but the fertilizer industry hopes for a better year ahead, according to one industry analyst.

Fertilizer affordability is one positive area for the industry, said Andy Jung, director of marketing and strategic analysis for The Mosaic Company, in his presentation at the 2015 Fertilizer Outlook and Technology Conference last week in Jacksonville, Florida.

LOWER K PRICES, SHIPMENTS

All plant nutrients have been under pressure in 2015, mainly because of lower commodity prices. This led to potash prices being weakened somewhat, Jung said.

There is a long list of reasons for this situation, he said. Further declines in crop prices, more moderate potash demand prospects, plentiful supplies of the fertilizer and changes in the competitive landscape have all ganged up on fertilizer as a whole this year, and potash cannot escape these issues.

At the same time, however, these lower nutrient prices also help to underpin demand as the crop nutrients become more affordable.

"Our plant nutrient affordability ... has bobbed and weaved with changes in agricultural commodity and plant nutrient prices, but the current reading indicates that plant nutrients are right in line with the historical average and clearly affordable," Jung said.

Jung said global potash shipments are estimated to be 59.1 million metric tons in 2015, down from 62.7 mmt in 2014.

This decline of 3.6 mmt is due to modest drops in use expected in some countries this year, but some larger declines in shipments are due to a build-up of channel inventories last year, he said. Notable declines are expected in Brazil and North America, and modest gains in China and India.

NORTH AMERICA PULLS BACK

Jung said North America shipments dropped around 2%, at 9.4 mmt, in 2014-15. Shipments are expected to again show a modest contraction in 2015-16 on cautious buyer sentiment and as pipeline inventories are worked through.

North American potash imports pushed to 1.7 mmt in 2014-15, he said. These imports are forecast to drop to more normal levels, closer to 1.0 mmt, in 2016 due to lower U.S prices.

Brazil is also using less potash. Shipments to Brazil are expected to back off from the record-setting levels seen in 2014.

Total product shipments are projected to decline to 30.7 mmt this year, off 5%, or 1.5 mmt, from 32.2 mmt last year and equal to the 2013 totals.

"Shipments are expected to rebound in 2016 to 31 mmt to 33 mmt, due to the combination of continued moderate grain and oilseed prices and the weaker Brazilian real," he said.

Brazil potash imports are forecast to fall to 8.1 mmt this year, off 10% from last year. Imports are projected to rebound to 8.5 mmt to 9.0 mmt in 2016, he said.

Record-setting demand for potash in China has been seen this year, and demand should only move higher in 2016. There have been steady imports and significant increases in domestic production, despite the government instituting a new 13% tax added on potash prices this past September.

Jung said China's 2015 potash shipments are estimated to be 14 mmt, and the forecast for 2016 is for a slightly higher number. Net imports reached just short of 8 mmt last year and are projected to hold near this level over the next few years despite rising domestic production.

India is another world player with building potash demand. Shipments and imports to India collapsed following significant changes to the phosphate and potash subsidy in April 2010.

Imports are slowly recovering, due in large part to the decline in global potash prices, as well as the pressing need to achieve more balanced and sustainable nutrient use there, Jung said. Imports are projected to increase to 4.6 mmt in 2015 and 4.9 mmt in 2016.

LONGER-TERM OUTLOOK

The 2015 potash world operational capacity is estimated to be 66.4 mmt. Jung said the long-term outlook for the potash industry could see capacity increase to around 80 mmt in 2020. Operating rates for potash producers is forecast to trend downward from 89% in 2015 to 87% in 2020.

No deep or prolonged cyclical downturn is predicted and current producers will scale operations to meet demand and clear the market, Jung said. Greenfield (new) projects are projected to begin to ramp up, but the full impact may not be seen until 2020.

"People still need food and the demand for potash worldwide continues to racket higher," Jung said. "We don't see a big change in global supply and demand of potash longer term."

Russ Quinn can be reached at russ.quinn@dtn.com

Follow him on Twitter @RussQuinnDTN

(ES/AG/CZ)

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