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  • Life after BPC:What happens now?

    Manager, Fertilizer Analysis ProductsPrincipal Consultant, Potash

    TFI/FIRT Fertilizer Outlook & Technology Conference,Tampa, November 2013

    Photocredit:Uralkali

  • Agenda

    2

    Uralkali quitsBPC:Causes&consequences

    PotashinNorthAmerica

    Whatnext?Theoutlookforsupply&demand

  • Uralkali Quits BPCWehaveseenpeople...inthefertilizerworlddosomeprettysillythings,butthisisprobablythesingledumbestthingthat

    Iveeverseen BillDoyle,CEOofPotashCorp

    Quotes:Bloomberg,BMOCapitalMarkets

    Theendofthepotashworldasweknowit JoelJackson,EquityResearchDirectoratBMOCapitalMarkets

  • Billionswipedofpotashstocksovernight

    4

    50

    60

    70

    80

    90

    100

    110

    02Jan

    13

    16Jan

    13

    30Jan

    13

    13Feb

    13

    27Feb

    13

    13M

    ar13

    27M

    ar13

    10Apr13

    24Apr13

    08M

    ay13

    22M

    ay13

    05Ju

    n13

    19Ju

    n13

    03Ju

    l13

    17Ju

    l13

    31Ju

    l13

    14Aug

    13

    28Aug

    13

    11Sep

    13

    25Sep

    13

    09Oct13

    23Oct13

    Potashsh

    arepriceinde

    x(Jan

    uary1

    st=100)

    Data:CRU

    $14billionknockedoffPOT,MOS,AGU

  • WhyhasUralkali leftBPC?

    5

    DisagreementovervolumesharesandsalesstrategyLukashenko overturnedexclusivityagreementwith

    BPCinDec2012Allegationsfrombothsidesthattheotherhadbeen

    seekingtobypassBPC

    RaildeliveriestoChina

    Otherraildeliveries

    USsanctionsagainstBelarussince2009

    1.9Mt

    1.8Mt

    0.8MtOnlyhalfofUralkalis salesarehandledbyBPC...

    ...Belaruskali assertsinfactonly1520%hasbeengoingthroughBPC

  • WhatareUralkalis objectives?

    Winmarketshare

    Restoredemandgrowth

    Deterinvestmentandlimitnew

    capacity

    ...putpressureonBelaruskali?

    ArrestofCEOnotpartoftheplan......littlesupportfromPutinandKerimovs futurenowindoubt.

  • ThemarketpressuresthatdroveUralkali toactwerealreadyevident

    40

    50

    60

    70

    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

    milliontonn

    esKCl

    KCldeliveries

    nonetgrowth

    7

    DemandUncertaintyhasparalyzedthemarket2013volumesnegativelyaffected,awaitreboundfrom2014...butneedpricestability togetevenbuyingandachieveexpectedrecovery

    SupplyMostprojectsremaincommitted...stillassessingtheoutlookCombinationofdelays/cancellationswithimproveddemandshouldaidmarketbalance

    HowhasCRUreviseditsforecasts?

  • Potash in North America

    Data:CRU,IFA,companyreports

    +5.7milliontonnes IncreaseinCanadiancapacity,20042012

    1.4milliontonnes DeclineinCanadianproduction,20042012

  • CapacityadditionsinNorthAmerica

    9

    0

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    3,500

    2002 2004 2006 2008 2010 2012 2014 2016

    Debottlenecking&rehabilitation

    Newshafts&refineries

    Time

    Capitalcost($M

    )

    ...havegotbiggerinscaleandhighercostpertonne

    Data:CRU,companyreports

  • PotashCorp hasbeenreinstatingcapacity

    10

    0

    2

    4

    6

    8

    10

    12

    14

    2004 2005 2006 2007 2008 2009 2010 2011 2012

    milliontonn

    esKCl

    PCS operational capability

    PCSnameplate

    Data:CRU,PotashCorp

    Mothballedcapacity

    CRUcapacityestimate

    PRODUCTION

  • Exportvolumes

    11Data:GTIS,FAI

    0

    2

    4

    6

    8

    10

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    milliontonn

    esKCl

    0

    2

    4

    6

    8

    10

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    milliontonn

    esKCl

    0

    2

    4

    6

    8

    10

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    milliontonn

    esKCl

    USmarketismature,butoffshoremarketshavent

    provideddemandgrowtheither

  • USCropAcreage

    12

    40

    50

    60

    70

    80

    90

    100

    2008 2009 2010 2011 2012 2013 2014 2015

    Millionacresh

    arvested

    Corn Wheat Soyabeans

    Cornpeakin2013,thensomeswingtobeansData:USDA

  • ComponentsofUSdemandgrowth

    4.3

    4.9

    0.13

    +0.67

    +0.14

    3.6

    3.8

    4.0

    4.2

    4.4

    4.6

    4.8

    5.0

    5.2

    2012consumption

    Changeincroparea

    Changeinapplication

    rates

    Changeincropmix

    2018consumption

    milliontonn

    esK

    2O

    8kg/ha 3.1Mha SoyabeansWheat

    Applicationratestorecoverfromlowin2012Data:CRU

  • ShipmentstoChina&India

    14

    0

    100

    200

    300

    400

    500

    600

    700

    800

    900

    1,000

    1,100

    1,200

    Q12004

    Q22004

    Q32004

    Q42004

    Q12005

    Q22005

    Q32005

    Q42005

    Q12006

    Q22006

    Q32006

    Q42006

    Q12007

    Q22007

    Q32007

    Q42007

    Q12008

    Q22008

    Q32008

    Q42008

    Q12009

    Q22009

    Q32009

    Q42009

    Q12010

    Q22010

    Q32010

    Q42010

    Q12011

    Q22011

    Q32011

    Q42011

    Q12012

    Q22012

    Q32012

    Q42012

    Q12013

    Q22013

    Q32013

    thou

    sand

    tonn

    esKCl

    Quarterlyimports 12monthrollingaverage

    Data:GTIS

    Since2009,CanadianshipmentstoChina&Indiahavedeclined

  • Componentsofglobaldemandgrowth

    15

    30.2

    39.5

    +1.5

    +6.5

    +1.2

    25

    27

    29

    31

    33

    35

    37

    39

    41

    2012consumption

    Changeincroparea

    Changeinapplication

    rates

    Changeincropmix

    2018consumption

    milliontonn

    esK

    2O

    5kg/ha 77.1Mha Oilseeds Grains

    Data:CRU

  • What next?

  • Importsinto...USA

    17

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    9.0

    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

    milliontonn

    esKCl

    2011 2012 2013

    Data:GTIS

    Fallapplicationunderway...2013betterthan2012butstillshortof2011

    DeliveriespeakFebMay,exceptin2012

  • Importsinto...Brazil

    18

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

    milliontonn

    esKCl

    2011 2012 2013

    Data:SIACESPviaANDA

    Despitesomepriceresistance,Brazilhasbeenthemostconsistentmajormarket

    Q4usuallyquiet

  • Importsinto...China

    19

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

    milliontonn

    esKCl

    2011 2012 2013

    Data:GTIS

    Irregularbuyingpatterns largestoragecapacityplusdomesticproduction

    Stillwaitingforcontracts

  • Importsinto...India

    20

    0.0

    0.5

    1.0

    1.5

    2.0

    2.5

    3.0

    3.5

    4.0

    4.5

    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

    milliontonn

    esKCl

    2011 2012 2013

    Data:FAI

    Subsidyreformhascausederraticbuyingpatterns 2013couldbelowestimportsforadecade

    Slowuptakeofcontractedvolumes

  • RetailpricinginIndiastillaproblem

    21Data:FAI

    0

    5

    10

    15

    20

    25

    30

    35

    Jan09

    Mar09

    May09

    Jul0

    9

    Sep09

    Nov

    09

    Jan10

    Mar10

    May10

    Jul1

    0

    Sep10

    Nov

    10

    Jan11

    Mar11

    May11

    Jul1

    1

    Sep11

    Nov

    11

    Jan12

    Mar12

    May12

    Jul1

    2

    Sep12

    Nov

    12

    Jan13

    Mar13

    May13

    Jul1

    3

    Sep13

    '000

    Rs./t

    Retailprice

    Subsidy

    Importprice

    IntroductionofNBS movefromfloatingsubsidy/fixedpricetofixedsubsidy/floatingprice

    Subsidyraisedinnewbudget,butnotenoughtooffsethighercontractpricesthat

    arrive4monthslater

    SubsidycutdespiteRupeestartingtodepreciate...

    ...andagain.

  • GlobalH1&H2deliveries

    22

    30.6 28.0 30.3

    0

    10

    20

    30

    40

    50

    60

    H12011 H12012 H12013

    milliontonn

    esKCl 24.7

    22.323.2

    0

    10

    20

    30

    40

    50

    60

    H22011 H22012 H22013(f)

    H1onaparwith2011,butuncertaintyhamperingsalesinH2

    Data:CRU

  • GlobalMOPdeliveries

    23

    5354Mtin2013

    *CRUslongtermguidanceis2%perannum

    5758Mtin2014

    Demandoutlookiscontingentonpriceleveland stability......butthereispotentialforabovetrend

    growthinmediumterm*

    India remainsaconcern...needforsubsidyreformafterelection

  • Someadvancedcapacityprojectsatrisk

    24

    50

    55

    60

    65

    70

    75

    80

    85

    90

    95

    2010 2011 2012 2013 2014 2015 2016 2017 2018

    milliontonn

    esKCl

    Existingcapacity

    Committedcapacityonly.Maximumoperatingrate 95%.

    Committedcapacity

    Committedbutatriskofpostponementorcancellation

    Data:CRU

  • Whatthismeansforthemarketbalance

    25

    Riskstobothdemandandsupplyaregreateronthedownside.

    60%

    65%

    70%

    75%

    80%

    85%

    50

    55

    60

    65

    70

    75

    80

    85