http://www.reuters.com/
WINNIPEG Manitoba – (Reuters) – A pickup in fertilizer demand has brightened the outlook for North American potash companies who suffered through plunging prices and profits after a European trading consortium collapsed in 2013.
But any celebration among investors may be premature.
A surplus of potash mining capacity is set to grow even larger in coming years, weighing down the global industry while favoring low-cost eastern European producers over North American miners, who are sticking to a marketing strategy that risks falling behind the times.
And the times are changing. Belarusian Potash Company (BPC), the counterpart to North America’s potash trading consortium Canpotex Ltd, collapsed a year ago, with one partner looking to increase volumes rather than limit output and hope for higher prices.
The first new mines in Western Canada in four decades are also under construction and would be fierce rivals to Canpotex partners Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc.
This year, global capacity will hit 82 million tonnes, but demand will fall well short, even at a record-high level of 57 million tonnes, according to London-based commodity research firm CRU. That gap is set to widen slightly by 2020, when capacity looks to reach 99 million tonnes, far more than is needed to meet demand of only 73 million.
CRU’s demand forecast is based on an assumption that demand will grow faster than it has in the last seven years. If it does not, the supply-demand gulf will grow even wider.
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