Market and product

The tumble in potash prices in North America showed growingsigns of bottoming out amid a sharp fall in inventories, as strong consumptionwithin the region offset some softness in export demand.

Potash prices, as measured in the benchmark export market atVancouver, have held at $300 a tonne for a third successive month, data fromCanadian fertilizer giant PotashCorp showed.

While below levels above $400 a tonne before Russia'sUralkali in July broke up the Belarusian Potash Company cartel, and sent worldprices tumbling by ditching a strategy of constraining sales volumes, the stabilitytallies with talk from fertilizer groups of recovering market conditions.

Prices of nitrogen and phosphate fertilizers - which alsosuffered late last year as a stand-off in potash markets, as buyers awaited tosee how far prices would fall, spread to other markets – have enjoyed substantialrecoveries in 2014.

Values of diammonium phosphate, a major phosphate nutrient,have risen by more than one-quarter at the key US export port of Tampa to roughly$500 a tonne.

Strong domestic appetite

The stabilisation in potash prices was supported by strong NorthAmerican potash sales, which rose 50% last month from March 2013 to 993,000tonnes, the PotashCorp data showed.

That continued a strong trend, with first quarter sales, at2.82m tonnes, up 48% year on year and the highest for a January-to-March periodsince 2010.

Indeed, coupled with a decline in production of 11.9% yearon year, the decent North American demand helped shrink the region's producersreduce their inventories to 2.87m tonnes.

While stocks often decline at this time of year, as spring sowingsand crop dressing programmes encourage consumption, the 9.9% year on year reductionin inventories is sizeable by recent standards, the biggest since October 2011.

Export competition

The PotashCorp data, however, underlined some softness in NorthAmerican potash exports, which at 968,000 tonnes were down 23% year on year inMarch.

Many producers have pulled back expectations for potash usethis year, despite the lower prices, with the weaker crop values until recentweeks viewed as depressing sentiment.

Russian giant Uralkali last week cut to 56m-58m tonnes, from58m-60m tonnes, its forecast for world potash demand this year, although still representinga rise of some 3m-4m tonnes year on year.

However, the North American export data also appear tosupport Uralkali's claim last week that it had recovered significant marketshare since ditching "price over volume" strategy in favour of maximisingrevenues.

Uralkali said that its share of world potash exports, whichfell to 17% in the first half of last year, had recovered to historic levels of23%.

This improvement had come largely at the expense of the majorNorth American shippers, Agrium, Mosaic and PotashCorp, whose market share hadfallen from 32% to 27%.