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PotashCorp - Market Analysis Report - Q1 2013

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  • World grain and oilseed production is expected to decline by 2 percent during the 2012/13 crop year due to severe drought in the US and adverse growing conditions in many other countries, especially Russia, Ukraine and Australia. As a result of this limited supply, global grain consumption is projected to fall for only the sixth time in 40 years. Grain and oilseed stocks are expected to decline significantly, with stocks-to-use for corn projected to hit its lowest level since 1973. Following the major shortfall in 2012, there is tremendous pressure to increase production during the coming growing season. As this chart illustrates, world grain and oilseed production would need to increase by approximately 6 percent (three times the historical growth rate) to meet projected consumption. Given lingering weather-related challenges in the US and Russia, we believe tight market conditions could potentially persist through at least 2013.
  • The implications of the supply shortfall in 2012 are evident in the US corn supply/demand balance. Demand has been rationed in all major use categories, particularly on the export side where sales are projected at a 41-year low. Despite this lower demand, ending stocks are expected to be down to only 630 million bushels, which represents a minimal working level for the market. We expect supply and consumption will rebound in 2013 but with soil moisture levels remaining a concern in some areas, we believe there is potential for continued pressure on corn supplies in the coming crop year.
  • USDA set its initial 2013 US corn yield forecast at 163.6 bushels per acre. It acknowledged the possibility of d éjà -vu since, as with last year’s outlook, there are risks to the 2013 forecast given low soil moisture reserves in many growing areas. Corn yields have been well below trend for the past three years and this has raised the question of the appropriate starting point for 2013 yield estimates. Most industry consultants have much lower yield expectations, with several forecasts closer to 155 bushels per acre. Based on this lower yield estimate, we project corn ending stocks in the range of 1.3-1.5 billion bushels compared to USDA’s estimate of 2.2 billion bushels. Given the uncertain yield and demand outlook, 2013 may be another year of volatile crop markets.
  • Soybean supply is extremely tight following short South American and US crops in 2012. Fortunately for US growers and consumers, soybean yield prospects improved late in the growing season, which allowed additional offshore demand to be met. However, the pace of weekly exports continues to surpass the rate implied by USDA’s full-year export projection, putting into question the adequacy of supplies through the remainder of the crop year. China continues to import more soybeans to meet rising edible oil and feed meal consumption. Its imports increased by 11 percent to 58 million tonnes during calendar year 2012 despite the significant rise in prices during the second half of the year.
  • South America has emerged as one of the world’s leading soybean-producing regions and is becoming an increasing presence in the corn market. Farmers in this region had the first opportunity to respond to the favorable crop economics in the second half of 2012 and increased their planted acreage. With harvest well underway, the massive challenge in Brazil is to efficiently export the large soybean and corn crops. As of the middle of March, around 90 vessels were waiting to load at the Port of Paranagua with 20 more reported to show up shortly. The wait times are as much as 40 days and could get much worse if there are labor strikes or work slowdowns at the port. Compounding the problem at the ports are inland logistical issues caused by poor road conditions and new restrictions that limit drivers to eight hours of driving before they must rest for 11 hours. Freight rates have increased significantly and it can now cost up to US$3.25/bushel to transport soybeans to a port. In some parts of Mato Grosso, transportation costs can account for approximately 25 percent of the price of soybeans.
  • USDA released its initial US planted area forecast for 2013, projecting acreage similar to the elevated levels achieved in 2012. We anticipate US corn at around 97 million acres, with rotational issues limiting acreage above this level. Soybean and wheat acreage are expected to rise by approximately 0.5 million acres respectively. The one crop we expect to lose acres is cotton, which we project will be down by approximately 2 million acres. With the recent improvement in cotton prices we do not expect cotton acreage to decline as much as USDA’s preliminary forecast. Canadian wheat acreage is expected to jump at the expense of canola, although the actual shift in area may be smaller than some industry consultants are projecting right now. Corn and soybean combined acreage is likely to increase due to the favorable economics for these crops.
  • Farm income in the US and Canada in 2012 is estimated to be at record levels. Higher crop prices and a supportive crop insurance program provided strong returns for US growers. US net cash farm income for 2012 is estimated to be almost 62 percent above the 10-year average. Yields in many regions of Western Canada were disappointing in 2012 but farm income for the year is still estimated at record levels due to higher prices. Based on the strength of current cash market prices and supportive new crop futures prices, we believe 2013 will be another strong year for farm returns.
  • Prices for most crop commodities have responded to tight supply/demand fundamentals and are trading well above historical levels. In recent months, the market has softened slightly as it weighs the tightness of old crop supplies with the potential for recovery in new crop supply. Over the next few months, several factors should influence the direction of crop markets. First will be the final condition of the South American crop and the timeliness of exports from this region. Second, the USDA March stocks report will indicate whether the market has effectively rationed old crop supply. If the report shows that US corn feed use remained resilient over the past three months, further rationing will likely be needed during the rest of the crop year. Finally, spring planting conditions in North America and the crop acreage battle will soon start to gain more attention from the market.
  • While crop prices have risen notably, nutrient prices have not responded in the same fashion. The chart above illustrates the relationship between spot corn prices and US retail fertilizer prices. Urea has fallen from the highs achieved in the first half of 2012 and DAP and potash retail prices have trended down slightly. We believe fertilizers are very affordable right now. Based on near-contract prices for corn, we estimate the average fertilizer cost as a percentage of corn revenue is below 12 percent, compared to the previous 10-year average of 17.4 percent.
  • Over the past three decades, US farmers have significantly increased corn plant populations. This is one of the factors that has contributed to yields moving from around 100 bushels per acre in the early 1980’s to the current trend yield of approximately 160 bushels per acre. The simple fact is higher plant populations remove more nutrients from the soil and higher grain yields remove more nutrients from the field. Despite these facts, application rates for potash have actually declined over this time, resulting in an increasing nutrient deficit. As a result, soil potassium levels are trending downward and more soils are testing below the critical levels established by land-grant universities. The increasing percentage of soils testing below the critical level also suggests that maintenance application rates need to increase to reverse this trend.
  • The economic return from potash fertilization depends on several variables, such as the expected yield response (impacted by soil test levels), potash prices and crop prices. For soils testing below established critical levels, we estimate that, based on current crop and potash prices, potash applications provide a significant return. For example, for soils testing below 90 PPM, the average expected yield response for soybeans properly fertilized with potash is estimated at eight bushels per acre, according to Iowa State University data. In adverse growing conditions, the yield response could be much higher. Assuming retail potash prices of $550 per short ton and $12 per bushel for soybeans, the economic return to potash application is estimated at more than $40 per acre. We believe current economics should provide the incentive for farmers to optimize their potash fertilization practices.
  • World potash shipments declined by approximately 5 million tonnes in 2012 as distributors in almost all regions reduced inventories and India’s demand fell due to a significant increase in its domestic retail price for potash. Global consumption levels were similar to 2011 and are estimated to have exceeded deliveries by approximately 3 million tonnes. We believe inventories in nearly all major markets are well below estimated levels at this time last year.
  • Potash shipments to the North American market during the first half of the 2012/13 fertilizer year (July-December) were slightly higher than the historical average. This demand was driven by a strong fall application season and low distributor inventories at the beginning of the fertilizer year. We expect demand will remain strong through the remainder of the fertilizer year due to the favorable crop economics, prospects for high planted area in 2013 and limited distributor inventory carried into the year.
  • Total fertilizer deliveries in Brazil reached a record of approximately 29.5 million tonnes in 2012 as farmers responded to favorable crop economics. Potash consumption increased by 9 percent, which drew down inventories at the retail level. Potash demand has remained strong in early 2013 with a large Safrinha corn crop planted in the first quarter of the year. We believe supportive crop economics and the ability to increase crop acreage will push Brazilian potash consumption and imports to record levels in 2013.
  • We expect global potash demand will increase to a range of 55-57 million tonnes in 2013. This is based on the expected increase in global consumption and the low distributor inventories carried into the year. China’s demand is expected to rise and large first-half volumes were settled with major suppliers in late 2012/early 2013. New contracts have been concluded in India for its 2013/14 fertilizer year (April-March), providing for a resumption in shipments to this market. We expect shipments to India during the 2013 calendar year of around 4 million tonnes, well below the previous record of more than 6 million tonnes in 2010. North American demand is anticipated to rise by approximately 1.5 million tonnes, returning to more historical average levels. Latin America should continue to be a region of strength again in 2013, in particular for granular potash in Brazil. Inventories in Southeast Asian markets were reduced in the second half of 2012 and we expect this, along with growing consumption, will contribute to improved demand in 2013.
  • Shipments to the US market during the first half of the fertilizer year (July-December) were slightly higher than the historical average. This was driven by a strong fall application season and low distributor inventories at the beginning of the fertilizer year. We expect phosphate fertilizer consumption will remain strong this spring, driving the need for healthy shipments through the first half of the calendar year.
  • Global phosphate fertilizer trade has been impacted by reduced demand from India over the past year as this market accounts for approximately 30 percent of DAP/MAP imports. India reportedly started the year with DAP stocks over 2 million tonnes (down to 1.5-1.8 million tonnes at the end of February) which needed to be reduced before new import demand emerged. The outlook in other key Asian markets, Latin America and Australia is more favorable and a steady increase in import demand is expected. Imports into the US market have surged over the past six months to meet anticipated strong demand. DAP exports from Saudi Arabia are expected to continue slowly ramping up and Morocco volumes are forecast to be stable despite the development of new granulation capacity. Given the potential reduction in Indian imports, shipments from producers in the US and China could decline slightly in 2013.
  • World ammonia production increased by 1.5 percent in 2012, but excluding China was down by 2 percent due to reduced output in Egypt, the FSU, Trinidad and North America. Several plant outages in the key producing regions combined with strong demand kept nitrogen markets relatively tight through 2012. New projects in Algeria and the Middle East faced delays, which limited new supply available to the market. Outages in Egypt related to natural gas supply have persisted in 2013, which is currently impacting exports from this country. Periodic gas supply reductions are anticipated in Trinidad but we expect the situation will be better than last year.
  • Global urea exports increased by 9 percent in 2012 largely due to the surge in Chinese shipments in the second half of the year. Urea exports from China reached a massive 7 million metric tonnes in 2012, falling just short of the record exported in 2010. Exports from regions outside of China were basically flat in 2012 with lower shipments from Egypt offsetting an increase in Middle East exports. North American imports rose by 2 million tonnes and accounted for 70 percent of the increase in global trade in 2012. India's imports were up more than 500,000 tonnes in 2012 with China supplying more than half of the total. The increase in urea exported during the second half of 2012 provided many importers with adequate supplies to begin 2013. Global trade is expected to increase over the remainder of the year with new supply in North Africa and the Middle East expected to meet increased demand from Asian and Latin American markets.
  • High-quality, economically mineable potash deposits are geographically concentrated. Canada, Russia and Belarus together account for just over two-thirds of global capacity and, according to the United States Geological Service, almost 90 percent of estimated reserves. While potash exists in other regions, securing an economically mineable deposit in countries with political stability and infrastructure availability can present significant challenges. Although some countries do have the advantage of proximity to key consuming markets, in many cases there is a lack of necessary infrastructure to transport the products. Another factor is the political instability in certain countries, which increases the project risk level and can impact the ability of developers to obtain project financing.
  • Entry into the potash business is difficult because of the cost and time to build new capacity. We estimate that upfront capital of CDN $4.2 billion would be required to build a conventional 2-million-tonne greenfield mine in Saskatchewan; costs could rise significantly when buying a deposit and developing the necessary distribution infrastructure. Given current competitive pressures in Western Canada on materials and skilled labor – especially engineers and contractors – we believe the cost of new capacity is unlikely to decline. While brownfield projects can be developed at a considerable discount to the cost of greenfield mines, both the cost and time required to complete them are substantial. We believe many of the less complex projects have been completed, and expect some brownfield projects under construction today will have high costs and may take as long as a greenfield mine to reach full operational capability.
  • The structure of the potash industry is unique among fertilizers – a result of concentrated global reserves and significant barriers to entry. In an industry with only 12 major producers, PotashCorp is the largest with approximately 20 percent of global capacity. While we expect global operational capability to rise between now and 2017, we continue to believe that greenfield capacity over the next five years will be limited and the majority of new capacity will come from expansion projects by existing producers.
  • A significant number of potash exploration projects have been announced around the globe; however, the majority of these are still at very preliminary stages of evaluation. Most have not completed required environmental work or feasibility studies nor secured the required financing. We believe any new project will take a significant amount of time and capital to advance. Based on publically available information, we believe that fewer than a handful of projects have formal corporate board approval and are currently under construction. K+S has received approval for its Legacy project in Saskatchewan and is in the early development stage. Eurochem is reportedly advancing two projects in Russia but has encountered a number of delays. Vale recently announced it has suspended work on its greenfield project in Argentina due to escalating costs. BHP continues to perform development work at its Jansen site in Saskatchewan but has yet to receive formal board approval.
  • While some observers believe new potash supply could outpace global demand in the future, what is often overlooked is the challenge of operating mines around the world at consistently high rates. In addition, significant lead time is required to develop new supply. We believe global potash markets will be relatively balanced over the next five years, given these supply-side factors and an anticipated return to the long-term trend line demand growth.
  • Several phosphate rock projects are under consideration but their timing and magnitude remain uncertain. Proposed projects in Latin America involve increasing Brazilian rock production for domestic use and Peruvian capacity for export. Moroccan rock capacity is expected to expand to meet its growing production capability for granulated phosphate fertilizer and feed products. A second phase of the Ma’aden phosphate development in Saudi Arabia is scheduled for completion in late 2016. The majority of the new projects being proposed are associated with existing producers and would support the development of downstream phosphate production. This could limit the impact of new supply on phosphate rock trade, with industry consultants expecting Morocco to remain the swing exporter.
  • As highlighted on the previous slide, new downstream phosphate capacity is expected to occur in regions able to expand phosphate rock production. The Ma’aden project in Saudi Arabia, with a capacity of 2.9 million tonnes of DAP per year, continues to ramp up following a lengthy series of delays in its start-up. A second phase is expected to come online within the next five years, which could add 1.5 million tonnes of P 2 0 5 capacity. A joint venture between Mosaic, Ma’aden and SABIC was recently announced with plans to build a phosphate complex capable of producing 3.5 million tonnes of finished product annually. In Morocco, OCP plans to increase phosphoric acid capacity over the next five years to utilize its expanding granulation capability. Phosphoric acid capacity additions in China and Brazil are associated with new solid phosphate plants.
  • Global phosphate operating rates were lower in 2012 largely due to a decline in Indian and Chinese fertilizer consumption. We expect some improvement in rates during 2013 with the extent of the rebound partially dependent on demand conditions in India. Over the medium term, we anticipate relatively balanced phosphate markets as growth in demand is expected to approximate capacity additions.
  • The development of shale gas and the resulting decline in natural gas prices over the past few years have led to an upswing in proposed nitrogen projects in North America. We estimate that approximately 10 expansion and 15 greenfield projects are currently under evaluation, and there are likely several other projects that have not been publically announced. It is uncertain how many of the projects under consideration will actually proceed as construction has begun at only a fraction of them and many could cost more than $1 billion. Most of the proposed projects would be scheduled for completion around 2016 or likely later. If several do proceed, the amount of nitrogen imported into North America would be reduced.
  • We developed three North American supply scenarios based on our view of the probability of new projects being developed over the next five years. We believe scenarios 1 and 2 are the most likely given the early stage of development of many projects and the significant capital required. The majority of capacity added in these two scenarios would be from brownfield and greenfield projects by existing producers. The majority of proposed projects are associated with the development of downstream nitrogen capacity. These projects will increase domestic ammonia supply but also raise the demand for domestically produced ammonia. There are only a few announced projects that would significantly reduce ammonia import requirements so the trade balances are highly dependent on their approval. Based on our assumptions in scenario 1 and 2, we expect North America will remain a net importer of ammonia, in particular for industrial consumers in the US Gulf.
  • The impact on urea trade could be much larger than on ammonia if a number of the high and medium probability projects proceed. We expect North America will remain a net importer of urea but at lower levels than currently exist. A similar impact is likely on the UAN trade balance. With the growth in domestic production capability, there could be potential for more regular offshore exports during low demand periods in North America.
  • Production costs are forecast to change in different regions with the high end of the ammonia cost curve expected to decline and the low end to rise. With the assumption that production from countries such as Ukraine and Russia will still be required to meet global demand, we expect supply costs from these regions will continue to have an impact on the market.
  • Transcript

    • 1. Q1 2013MarketAnalysisReportMarch 20, 2013 PotashCorp.com
    • 2. Forward-looking StatementsThis presentation contains forward-looking statements or forward-looking information (forward-looking statements).These statements can be identified by expressions of belief, expectation or intention, as well as those statements thatare not historical fact. These statements are based on certain factors and assumptions including with respect to foreignexchange rates, expected growth, results of operations, performance, business prospects and opportunities andeffective tax rates. While the company considers these factors and assumptions to be reasonable based on informationcurrently available, they may prove to be incorrect. Several factors could cause actual results or events to differmaterially from those expressed in the forward-looking statements, including, but not limited to: variations from ourassumptions with respect to foreign exchange rates, expected growth, results of operations, performance, businessprospects and opportunities, and effective tax rates; fluctuations in supply and demand in the fertilizer, sulfur,transportation and petrochemical markets; costs and availability of transportation and distribution for our raw materialsand products, including railcars and ocean freight; changes in competitive pressures, including pricing pressures;adverse or uncertain economic conditions and changes in credit and financial markets; the results of sales contractnegotiations within major markets; economic and political uncertainty around the world; timing and impact of capitalexpenditures; risks associated with natural gas and other hedging activities; changes in capital markets; unexpected oradverse weather conditions; changes in currency and exchange rates; unexpected geological or environmentalconditions, including water inflows; imprecision in reserve estimates; adverse developments in new and pending legalproceedings or government investigations; acquisitions we may undertake; strikes or other forms of work stoppage orslowdowns; rates of return on and the risks associated with our investments; changes in, and the effects of, governmentpolicies and regulations; security risks related to our information technology systems; and earnings, exchange rates andthe decisions of taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties canbe found in our Form 10-K for the fiscal year ended December 31, 2012 under the captions “Forward-LookingStatements” and “Item 1A – Risk Factors” and in our other filings with the US Securities and Exchange Commission andthe Canadian provincial securities commissions. Forward-looking statements are given only as at the date of thispresentation and the company disclaims any obligation to update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise, except as required by law.
    • 3. Presentation Overview• Agriculture and Fertilizer Market Update• Global Potash Supply Overview• Global Phosphate Supply Overview• North American Nitrogen Supply Overview
    • 4. Agriculture and FertilizerMarket Update
    • 5. World Grain and Oilseed Supply/DemandNeed for Historically Large Production Increase to Avoid Additional Shortfall Million Tonnes 2013 Production Growth Rate Scenarios 6% (~ 3X Historical Growth Rate) 4% (~ 2X Historical Growth Rate) 2013F refers to the 2013/14 crop year. Consumption forecast based on historical trend line growth. Source: USDA, PotashCorp
    • 6. US Corn Use and Ending StocksSupply Shortfall Has Resulted in Significant Demand Rationing Use – Billion Bushels Stocks – Billion Bushels 2012F refers to the 2012/13 crop year. Source: USDA
    • 7. US Corn YieldRecent Yields Have Fallen Well Below Preliminary USDA Projections Bushels/Acre Source: USDA
    • 8. Soybean Market SituationReduced Production and Strong Chinese Demand Expected to Keep Supply TightUS S&D China Imports Use – Billion Bushels Stocks-to-Use Ratio Million Tonnes 2012F refers to the 2012/13 crop year. Source: USDA
    • 9. South American Crop ProductionWorld Is Counting on a Large Production Response From South AmericaSoybeans Corn Million Tonnes Million Tonnes 2012F refers to the 2012/13 crop year. Source: USDA
    • 10. North American Planted Acreage ForecastExpect Large Planted Acreage of Major Fertilizer-Consuming CropsUS Major Crop Acreage Canadian Major Crop Acreage Million Acres Million Acres Source: USDA, Doane, Statistics Canada, Agriculture Canada, Kostal Ag, PotashCorp
    • 11. North American Farm IncomeStrong Crop Prices Support a Healthy Farm EconomyUS Net Cash Farm Income Canadian Net Farm Income Billion US$ Billion CDN$ Source: USDA, Statistics Canada, AAFC, PotashCorp
    • 12. North American Crop PricesPrices Remain Well Above Historical Levels Price Index (10-Year Average = 100) Source: Bloomberg
    • 13. US Corn and Retail Fertilizer PricesFertilizer Prices Lag Behind Increases in Crop Prices Price Index (January 2011 = 100) Source: DTN, Bloomberg
    • 14. US Corn Plant Populations and Potash UseApplication Rates Have Not Kept Pace With Nutrient Removal Average Plant Population per Acre Application Rate* – lbs per Acre * Based on USDA application rate multiplied by percentage of acres applied Source: USDA, PotashCorp
    • 15. Incremental Economic Return to Potash Fertilization Strong Projected Returns on Soils Testing Below the Critical Level Incremental Economic Return – US$/AcreSoybean Return Variables Av. Yield Rate Retail K Soybean Price – US$/bushelSoil Test lbs of Response PriceK (PPM) K20/acre bu/acre* $/st 90-130 6 90 $550 *Based on soybean yield response data from Iowa <90 8 120 $550 Source: Iowa State (Mallarino, 2008), PotashCorp
    • 16. World Potash Shipments and ConsumptionSignificant Global Distributor Inventory Destocking Occurred in 2012 Million Tonnes KCl Distributor inventory estimated to be ~3 million tonnes lower at the end of 2012 Source: Fertecon, IFA, PotashCorp
    • 17. North American Potash Market UpdateAnticipate Strong Spring Demand to Meet Projected Consumption Million Tonnes KCl Source: IPNI, USDOC, AAPFCO, PotashCorp
    • 18. Brazil Potash Deliveries to Final ConsumerSupportive Agriculture Fundamentals Drove Record Potash Consumption Cumulative Deliveries - Million Tonnes KCl Equivalent Source: ANDA, PotashCorp
    • 19. World Potash ShipmentsExpect Significant Rebound in Global Demand Million Tonnes KCl 2013 forecast bridge by key market Source: Fertecon, CRU, Industry Publications, PotashCorp
    • 20. US Phosphate DemandSpring Demand Expected to Be Strong Producer Shipments - Million Tons DAP/MAP Source: TFI, PotashCorp
    • 21. World DAP and MAP TradeTrade Expected to be Relatively Flat in 2013World DAP/MAP Exports World DAP/MAP Imports Million Tonnes Million Tonnes Source: Fertecon, PotashCorp
    • 22. 2012 Ammonia Production ChangesCurtailments in the FSU, Egypt and Trinidad Tightened Global Market Yr/Yr Change - Thousand Tonnes China increased production by 3.3 million MT which is mostly consumed domestically. * Excluding Trinidad Source: IFA
    • 23. World Urea TradeChina Remained a Wild Card in the Global Urea MarketWorld Urea Exports World Urea Imports Million Tonnes Million Tonnes Source: Fertecon, PotashCorp
    • 24. Global Potash SupplyOverview
    • 25. Regional Analysis of Potash DevelopmentsMost Regions Have Limited Resources and Political Instability Source: CRU
    • 26. Saskatchewan Brownfield and Greenfield Potash CostsLeveraging Our Brownfield Expansion Advantage Capital Cost per Tonne – (CDN$) * New Brunswick cost per tonne based on new 2MMT mine (net addition totals 1.2MMT). ** Based on 2MMT conventional greenfield mine constructed in Saskatchewan. PotashCorp project costs exclude infrastructure outside the plant gate. Assuming US$/CDN$ exchange rate at par. Source: AMEC, Public Filings, PotashCorp
    • 27. World Potash Producer ProfileMajority of the Capacity Increases Are Expected From Existing Producers Million Tonnes KCl – 2013-2017F PotashCorp * PotashCorp investments: ICL (14%), APC (28%), SQM (32%) and Sinofert (22%) Note: PotashCorp based on operational capability (estimated annual achievable production) while competitor capacity is stated nameplate, which may exceed operational capability Source: Fertecon, CRU, IFA, PotashCorp
    • 28. Global Greenfield Potash ProjectsMultiple Potash Projects Are Under Review But Very Few Under ConstructionNumber of Exploration/Development Projects by Region Number of Approved Greenfield Potash Projects Under Construction Source: Fertecon, CRU, Public Filings, PotashCorp
    • 29. World Potash Supply and DemandLimited Greenfield Capacity Operational by 2017; Demand Rebound Is Biggest Factor Million Tonnes KCl Operating Rate* - Percent * Based on percentage of operational capability (estimated annual achievable production level). Shipment range based on ~3% annualized demand growth rate (2002-2017). Operating rate forecast based on mid-point of shipment range divided by operational capability (including announced projects; assuming typical ramp-up period for new capacity). Source: Fertecon, CRU, IFA, PotashCorp
    • 30. Global PhosphateSupply Overview
    • 31. Global Phosphate Rock Capacity AdditionsMost New Capacity Occurring With Existing Producers Cumulative Capacity Additions - Million Tonnes Source: CRU, Fertecon, PotashCorp
    • 32. New Global Phosphoric Acid Capacity*Majority of Capacity Being Developed in Saudi Arabia and Morocco Million Tonnes P2O5 *Capacity includes several projects classified by sources as uncertain, and excludes projects classified as unlikely Source: CRU, Fertecon, PotashCorp
    • 33. World Phosphoric Acid Supply and DemandExpect Relatively Balanced Market in the Medium Term Product - Million Tonnes P2O5 Operating Rate – Percent Source: CRU, Fertecon, PotashCorp
    • 34. North AmericanNitrogen SupplyOverview
    • 35. Major North American Fertilizer Production LocationsNumerous Nitrogen Capacity Announcements - Existing N Complex - High Probability N Projects - Medium Probability N Projects - More Speculative N Projects Source: Blue, Johnson & Associates; Industry Publications, PotashCorp
    • 36. North America Ammonia ProfileMajority of New Ammonia Production Expected to be Consumed by Downstream Products Million Short Tons Scenario 1 – assumes all high probability projects are completed by 2018 Scenario 2 – assumes all high and medium probability projects are completed by 2018 Scenario 3 – assumes all high, medium and a few speculative projects are completed by 2018 Scenarios based on PotashCorp assessment of announced project probabilities and potential product mix. Source: CRU, Fertecon, Blue Johnson & Associates, Public Filings, PotashCorp
    • 37. North America Urea ProfileUrea Imports Expected to Shrink With New Capacity Start-ups Million Short Tons Scenario 1 – assumes all high probability projects are completed by 2018 Scenario 2 – assumes all high and medium probability projects are completed by 2018 Scenario 3 – assumes all high, medium and a few speculative projects are completed by 2018 Scenarios based on PotashCorp assessment of announced project probabilities and potential product mix. Source: CRU, Fertecon, Blue Johnson & Associates, Public Filings, PotashCorp
    • 38. Ammonia Delivered Cost to US GulfExpect Production Will Be Required From Higher-Cost Offshore Suppliers US$/Tonne Note: Cost of production estimates based on natural gas price forecast range for 2017 Source: Fertecon, PotashCorp
    • 39. Thank youThere’s more online: PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter