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Potash Corp. of Saskatchewan Inc. has cut its profit outlook for this year due to weak demand after the breakup of a Russian-Belarussian potash cartel sent prices of fertilizer tumbling.
The Saskatoon-based company, the world’s biggest potash producer, said on Thursday it would now earn between $2 to $2.20 a share this year, down from its previous forecast of between $2.45 and $2.70 per share.
The weaker forecast from Potash Corp. reflects difficulty the industry faces following the Belarus Potash Co. breakup in July. Russia’s OAO Uralkali withdrew from a partnership it had with rival Belarus’s Belaruskali, dismantling one of the two marketing alliances established to sell potash to the world.
The Belarus joint venture and its North American counterpart, Canpotex Ltd., controlled 70 per cent of the potash market before the breakup and therefore could influence the price and global supply of fertilizer. Potash does not trade on any public markets, leaving price formation almost entirely up to producers of the product and their customers.
“Uralkali’s change in sales strategy created tremendous market uncertainty and a state of paralysis in most regions,” Potash Corp.’s chief executive officer Bill Doyle said on a public call with analysts after the company announced third-quarter results.
“But we caution against getting too caught up in the recent drama and headlines. Admittedly the recent slowdown in potash demand and decline in pricing have been challenging, but that does not mean that the prospects for our industry have forever changed,” he said.
Now the future is murky with big buyers of the crop nutrient waiting to see how far the price of potash will drop before signing any contracts.
Potash Corp. said in Thursday’s announcement that its average realized potash price in the third quarter fell 23 per cent to $307 a tonne from $429 a tonne last year.
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