Analyst calls recent PotashCorp cutbacks surprising, says market improving

“They’re seeing that the cutbacks they’ve already made have yielded some positive results. So maybe they thought that they would cut back a little bit more, keep inventories from getting too built up over the winter,” he said.

Asbridge said Canada’s potash producers have been shouldering most of the load when it comes to reducing output. He said overall, North American potash companies are running at about 50 per cent capacity.

Contrast that with Belarus, whose main potash producer recently announced it was producing at 100 per cent capacity. Asbridge said Russian, European and Israeli firms are also all operating at higher levels.

“The Canadian producers are the ones that have really taken the big hit in terms of capacity utilization. They’ve shut more capacity down…. than all the rest of the world’s potash combined, actually,” Asbridge said, noting most of the Canadian shutdowns have been temporary, leaving plenty of capacity available for an eventual turnaround.

Asbridge said that fundamentally, potash is like any other commodity — meaning prices will come up as producers stop the expansions they undertook during the last boom.

“What happens is we build too much capacity like we’ve done over the last seven years,” he said.

“We’ve had fairly good fertilizer prices as well as crop prices, so they’ve built too much capacity. What we need to do now is let the cycle kind of work its way through until capacity growth is below the growth in the demand factor.”

– With files from 650 CKOM’s Chris Vandenbreekel.

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by CKOM News Staff

Analyst calls recent PotashCorp cutbacks surprising, says market improving

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