December 3, 2008 / 8:29 PM / 10 years ago

CORRECTED - WRAPUP 1-Potash Corp says supply is expected to remain short

(Fixes headline and first paragraph to say supply, not demand, to remain short)

* Potash sees opportunity in expansion projects

* Agrium says ahead of schedule on UAP cost savings

* Potash Corp shares down 2.8 percent at C$67.40

* Agrium shares down 1 percent at C$32.32 (In U.S. dollars)

TORONTO, Dec 3 (Reuters) - Potash Corp of Saskatchewan POT.TO, the world’s biggest fertilizer company, said on Wednesday that global potash supply is expected to remain short to balanced over the next few years, giving it an ideal opportunity for its expansions.

“Some competitors are working to increase their production capabilities, but even if all announced projects are completed, global potash supply from other producers will not grow as quickly as consumption forecasts,” Potash Corp Chief Executive Bill Doyle told an industry conference in New York.

However, he said, “limited access to credit and higher geopolitical risk will limit the potential for competitive greenfield capacity coming online.”

Doyle said his company is in a good position to take advantage of the need for additional capacity with its expansion plans.

“We believe that our line-up of expansion and debottlenecking projects are more valuable today than they were a few months ago, and will be necessary to meet the increase in demand,” he said.

Fertilizer prices soared in the first half of 2008, on the back of booming demand, tight inventories and record grain prices. However, the credit crisis and the global economic slowdown have weighed on the agricultural sector and grain prices have collapsed, after having peaked around mid-year.

Though cautioning that it was not a forecast, he said it is feasible that rising prices and additional volumes could push the company’s annual potash gross margin toward $25 billion — which would be a record for the company.


Its Canadian-based rival, Agrium Inc AGU.TO, which boosted sales capacity with a $2.65 billion acquisition of UAP Holding earlier this year, is expected to be ahead of its cost-savings target for the deal, but is not yet ready to formally change the outlook, Agrium CEO Mike Wilson said.

At the time of the deal, Agrium had said it would achieve $115 million in annual savings by 2010.

“We will deliver that and we will deliver that ahead of schedule,” Wilson said.

Agrium, the world’s third-largest nitrogen producer and the top U.S. retailer of crop supplies, announced the offer one year ago, creating North America’s largest agricultural retailer with a market share of almost 15 percent.

Share prices of the Canadian fertilizer producers have been pulled down in the meltdown, losing about half their value so far this year. Potash Corp’s shares were down 2.8 percent at C$67.40 on the Toronto Stock Exchange on Wednesday. Agrium was off 1 percent at C$32.32.

$1=$1.26 Canadian Reporting by Scott Anderson; Editing by Jeffrey Jones

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