PotashCorp - Market Analysis Report - Q3 2013
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  • Currencies in several countries including India, Brazil and Indonesia have devalued compared to the US dollar in 2013. Economic and political concerns have caused investors to place their investments in markets that are perceived to be more stable, such as the US. The notion that the US government could begin removing economic stimulus has also supported the value of the US currency and exacerbated the devaluation in other markets. India’s Rupee dropped to an all-time record low in late August 2013 but has bounced back slightlyin September. Brazil’s Real is down 10 percent since January 2013. The impact on agriculture in these regions is dependant on the level of exposure to the export and import market. For countries such as India, that are not major crop exporters but have significant agricultural imports, the devaluation can be a detriment. Farmers in countries such as Brazil who export corn, soybeans and sugar denominated in US dollars will benefit from the devaluation.
  • The International Monetary Fund (IMF) released its latest World Economic Outlook on July 9 and projected global GDP growth of 3.1 percent in 2013, rising to 3.8 percent in 2014. These estimates were down slightly from its projections in April due in large extent to weaker domestic demand and slower growth in several key emerging market economies, as well as a more protracted recession in the eurozone.The IMF cited infrastructure bottlenecks and other capacity constraints, lower export growth, lower commodity prices and financial stability concerns as reasons for the lower growth rates in emerging markets. However, economic expansion in most developing countries remains well above developed countries and is projected to exceed 5 percent in 2014.
  • US unemployment peaked at 10 percent during the second half of 2009 but has steadily improved since that time, in line with a general improvement in the economy. This is one factor that has contributed to improved consumer sentiment, as illustrated by the growth in durable goods sales since 2009. Sales are up approximately 3 percent this year compared to 2012 and are over 10 percent higher than levels achieved prior to the economic downturn. The rebound has been led by sales of motor vehicles, construction materials and construction equipment.
  • The recovery in vehicle and construction expenditures has continued in 2013 and is projected to maintain an upward trend over the next few years. Light vehicle sales are expected to grow by approximately 4 percent per year and are approaching levels achieved prior to the sharp downturn in 2008. Housing starts have started to move higher after several years of extremely low activity. Over the next two years, growth in housing starts is expected to exceed 21 percent per year. Non-residential construction expenditures have been relatively steady over the past few years and we expect a gradualupward trend over time, along with economic growth.
  • Corn and wheat prices have moved down from the record levels set in 2012 due to the prospect for improved global and US crops this year. Recent hot and dry conditions in the US have provided some support for the market but pricing remains volatile as the size of the US corn crop has yet to be determined. Soybeans have been more stable due to strong demand and reduced US production prospects.Forecasts hold the promise of a partial recovery in grain stocks but there is still some time before the crop is in the bin. Stock recovery will be a multiyear process, and as a result, crop prices remain above the 10 year average to incent farmers to continue investing in higher crop production.
  • Monsoon rains are critical if India is to produce a large enough crop for a growing population. As of mid-September, the monsoon was 6 percent above normal and some regions have experienced excess moisture leading to localized flooding damage. In general, the monsoon has been good for the Kharif crops such as rice, cotton and sugar withplanted area up more than 8 percent from last season.Good moisture levels should be beneficial for the upcoming Rabi crop and give farmers the confidence to invest in fertilizer. However, long-term issues of adequate and balanced fertility still need to be addressed to help sustain crop production beyond this season.
  • China is a large producer and consumer of agriculture commodities and its diverse growing regions mean that conditions can be highly variable. Since the beginning of the year, parts of central and southern China have received 25 to 50 percent less than normal rainfall accompanied with above normal temperatures.Unusually heavy rainfall (40 to 50 percent above normal) was recorded in Northeast China this summer, leading to widespread flooding and waterlogged cropland. The impact on crops is still undetermined, but preliminary estimates by Chinese sources estimate that flooding has affected more than 2 million hectares of cropland in the region.
  • China, the world's top wheat grower, is expected to import the highest volume of this grain in a decade after its domestic harvest was damaged by adverse weather. Rains in late May damaged domestic wheat quality, downgrading significant tonnes to feed-use, thereby requiring strong imports of milling quality wheat. China’s wheat and corn imports are projected to increase to more than 16 million tonnes in 2013/14, nearly three times greater than the previous year’s level. Imports of rice, a strategic staple crop, have also increased. The government reported that 2012 marked the ninth consecutive year annual grain output increased but it appears that growing demand is outpacing domestic production. Highlighting this potential was a recent government think-tank that reported China could begin importing as much as 20 to 30 million tonnes of corn as demand rises and efforts focus on ensuring adequate domestic production of rice and wheat.
  • As is the case with almost every growing season, the development of the US corn crop is highly scrutinized and the source of great speculation. Given the late developing crop both yield and final area estimates remain uncertain as of mid-September.Although the summer was cool and beneficial for pollination, it masked the fact that soil moisture levels were rapidly declining in some regions leaving several key states with corn condition ratings below historical levels. The recent hot and dry weather will impact the crops ability to fill and we expect the final US average yield will fall below USDA’s current estimate of 155.3 bushels per acre. This would mark the fourth consecutive year of below trend corn yields.Based on the assumption of lower acreage and yield potential, we project corn production of approximately 13.3 billion bushels. This scenario would allow for some much-needed rebuilding of US corn stocks but implies a more balanced outlook than USDA projections.
  • Similar to the outlook for corn, the USDA is projecting an increase in global soybean production and stocks during the 2013/14 crop year. However, the projection is highly dependant on South American soybean growers planting and harvesting a record crop. With the harvest in this region still five months away the outlook for global supply remains uncertain. In the US, hot and dry conditions during pod fill have impacted yield potential. USDA lowered its US yield projection to 41.2 bushels per acre and ending stocks to only 4.8 percent of total use.
  • Based on projected retail prices this fall, we believe that fertilizer will be an attractive investment under a wide range of crop price scenarios. Assuming $4.75 per bushel corn price in 2014, we estimate fertilizer costs as a percentage of revenue would be less than 15 percent. This is well below the previous 10-year average of approximately 17.5 percent. Even if prices fall to around $4.00 per bushel, the cost as a percentage of corn revenue would be similar to the historical average. While costs for all three nutrients are projected to be lower compared to the 2012/13 application season, the largest change is the potential for lower nitrogen costs, which typically account for more than 60 percent of total corn fertilizer costs.
  • After two near-record corn crops in Brazil, domestic prices have weakened following the Safrinha harvest. This is challenging corn economics in some regions of Brazil that have limited local storage and expensive transits to port. The government recently announced increased funding and subsidized credit to help enhance storage and reduce logistical bottlenecks. These are important long-term investments but will not resolve these issues immediately.Helping to offset the weaker domestic corn situation is the weaker Real that is supporting export returns for Brazilian commodities. The return on soybeans remains very strong and is expected to push planted acreage higher this year.
  • Cold weather in parts of Brazil has slowed the start of the full season corn planting and soybean planting will not commence until after the middle of September. Given the strength of soybean economics, planted area for this crop is forecast to increase by approximately 5 percent this year. Favorable wheat economics are expected to support a small acreage increase. Full season and Safrinha corn area is projected to decline, however we are still several months away from the second crop planting season and the economics could shift over this time period.
  • When evaluating the world supply outlook it is important to distinguish between reported nameplate capacity and estimated operational capability. First, operational capability accounts for annual maintenance downtime that is required at most operations. Second, this measure accounts for normal ramp-up time that is required when commissioning new capacity.The starting point for determining operational capability is the historical maximum reported production level by region. From that point, reported changes in capacity are included, accounting for typical ramp-up periods for new capacity. We estimate world potash operational capability at approximately 66 million tonnes in 2013 compared to the historical cumulative regional maximum production of 59 million tonnes (not all regional maximum production levels achieved in same calendar year). The majority of the increase in estimated operational capability compared to the historical maximum production level is due to the completion of brownfield projects in North America.
  • We believe the time and capital costs required to build new fertilizer capacity are often underestimated. This was highlighted during the past year by multiple announcements of project delays and postponements for all three nutrients. The International Fertilizer Industry Association (IFA) reports that timelines for most proposed potash projects have slipped by six to 18 months and several greenfield projects have been canceled. These changes have removed approximately 8 million tonnes of potash operational capability from IFA’s outlook for 2016.
  • Given the long time horizon required to develop new potash capability and recently announced project delays and postponements, we expect the majority of the capacity added over the next 5 years will be related to brownfield expansions. From 2012 to 2017, we expect approximately 14 million tonnes of new operational capability will be added, assuming all current projects are completed as announced. The largest percentage of this will come from expansions at PotashCorp mines in Saskatchewan and New Brunswick.
  • Buyers in key offshore markets turned their attention to securing new potash supply in 2013 after limited activity in the final quarter of 2012. During the first eightmonths, exports were up 18 percent compared to the same period in 2012 and are also 27 percent above the previous five-year average. North American producers exported an all-time record of more than 6 million tonnes during the first half of 2013. Despite some near-term market uncertainty, we believe the underlying potash consumption drivers are strong and will ultimately drive the need for increased demand in the major offshore potash markets.
  • Potash application rates in North America have not kept pace with crop removal, resulting in an increasing nutrient deficit. The graph above illustrates the historical trend for the entire US and the estimated application deficit by region for 2010. Based on this data we estimate that the application deficit in 2010 totaled approximately 8 million short tons. Relatively large application deficits were found in most major crop producing regions.We believe this growing application deficit is not sustainable and if not addressed could jeopardize the long-term productivity of the soil. We expect the initial shift will occur in the Midwest and Southeast, which have soils that are likely to have the greatest response to additional potash applications. Over time we expect changes will be required in central and western regions as the large application deficit will ultimately draw down soil test levels.
  • Indian import demand started the year slowly due to higher beginning inventories and the continued discrepancy between the price of urea and phosphate-based fertilizers. While inventories have declined, the depreciated value of the Rupee is now also a serious concern to buyers. Since the beginning of May, the Indian currency has declined by over 10 percent against the US dollar. The chart illustrates the devaluation of the Rupee over the past few months and the impact it is having on the break-even importer price for DAP. The currency move from 54 to 66 Rupees per USD is the equivalent of a more than $100 per tonne change in DAP prices, holding all other costs constant.
  • China has become a significant exporter of phosphate products largely supplying DAP to key countries in Asia and to a lesser extentLatin America.Adverse weather conditions earlier in the year delayed its spring application and negatively affected domestic demand for phosphate fertilizer. Although the low-tariff export window was extended by one month in 2013 to allow producers to fully participate in the Indian DAP buying season, weak Indian import demand may make the export perspective look less optimistic. There is a wide range of costs for Chinese DAP producers depending on the degree of integration, source of raw material supplies, size of the plantsand distance from the ports. In general, integrated producers will have a significant cost advantage compared to non-integrated producers. The reported export price for DAP is currently below the estimated cost for many higher-cost producers.
  • Brazil has been the most active global phosphate market in 2013, largely supported by favorable crop economics. Both imports and domestic production of phosphate fertilizers have increased significantly this year compared to the same period last year. MAP imports are up 25 percent and DAP imports are up 24 percent year over year. Domestic production of finished phosphates have increased 6 percent on a P205 basis compared to the same period of 2012, primarily due to higher production of triple super phosphate (TSP) and single super phosphate (SSP). While the increased first half supply allowed buyers to take a more cautious approach in recent months, we expect strong farm level consumption will support solid demand for the remainder of the year.
  • Global ammonia trade is expected to be flat in 2013 as good demand from major East Asian importing countries offsets softer demand in India and Europe.Gas cutbacks continue to impact ammonia production and export capability in Trinidad. Ammonia exports from FSU producers were up significantly in the first half of 2013, however recently announced production curtailments could limit exports in the second half of the year. Middle East exports have declined significantly due to restrictive trading conditions for Iranian product. Exports from Saudi Arabia and Qatar are also expected to fall compared to last year due to lower product availability. Exports from North Africa have been lower than previously expected due to ongoing gas supply issues in Egypt and the delayed start-up of new capacity in Algeria.
  • New export-oriented plants in the Middle East and Northern Africa are expected to account for most of the urea capacity additions outside of China in the medium-term. New capacity has reportedly come online in Algeria and the United Arab Emirates during the third quarter that will add urea and ammonia export supply. As in the past, we could see project delays as a result ofpolitical instability and the increasing cost andcomplexities in completing and commissioning large industrial nitrogen complexes. IFA reported that 25 urea projects have been delayed over the past year impacting approximately 18 million tonnes of urea capacity.
  • Despite the Chinese government’s intention of tackling the urea surplus, at a local level interest in building more ammonia/urea capacity remains strong. Most of these new projects are proposed to drive economic growth and are supported by local government tax incentives. New plants will have the advantage of better technology and more efficient raw material use, which will ultimately force small and inefficient nitrogen producers out of the markets. Consolidation will be the key trend in the nitrogen industry in China, although the timing of the process is difficult to estimate.

PotashCorp - Market Analysis Report - Q3 2013 Presentation Transcript

  • 1. PotashCorp.com September 18, 2013 Q3 2013 Market Analysis Report
  • 2. This report 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 that are not historical fact. These statements are based on certain factors and assumptions including with respect to: foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities and effective tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results or events to differ materially from those expressed in the forward-looking statements, including, but not limited to the following: variations from our assumptions with respect to foreign exchange rates, expected growth, results of operations, performance, business prospects 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 materials and 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 contract negotiations within major markets; economic and political uncertainty around the world; timing and impact of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets; unexpected or adverse weather conditions; changes in currency and exchange rates; unexpected geological or environmental conditions, including water inflows; imprecision in reserve estimates; adverse developments in new and pending legal proceedings or government investigations; acquisitions we may undertake; strikes or other forms of work stoppage or slowdowns; rates of return on and the risks associated with our investments; changes in, and the effects of, government policies and regulations; security risks related to our information technology systems; and earnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2012 under the captions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our other filings with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this report and the company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Forward-looking Statements
  • 3. • Economic Update: Slides 4-8 • Agriculture Update: Slides 9-19 • Potash Market Update: Slides 20-26 • Phosphate Market Update: Slides 27-32 • Nitrogen Market Update: Slides 33-38 Report Overview
  • 4. Economic Update
  • 5. Source: Oanda, PotashCorp -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% China EU Canada Malaysia Brazil India Indonesia Percentage Change (January 1 - September 13, 2013) Weaker Exchange Rates Benefit Major Crop Exporting Regions World Currency Changes (versus USD)
  • 6. Source: IMF -2% 0% 2% 4% 6% 8% 10% 2011 2012 2013F 2014F 2011 2012 2013F 2014F 2011 2012 2013F 2014F 2011 2012 2013F 2014F 2011 2012 2013F 2014F 2011 2012 2013F 2014F 2011 2012 2013F 2014F World EU US Brazil ASEAN-5 India China Year over Year GDP Percentage Change Uneven Economic Recovery Continues World GDP Outlook Note: ASEAN-5 is comprised of Indonesia, Malaysia, Philippines, Thailand and Vietnam.
  • 7. Percent Unemployment Rate Falling and Consumer Sentiment Improving US Economic Indicators Unemployment Rate 50 75 100 125 150 175 200 Durable Goods Sales Average Monthly Sales – Billion US$ Source: US Department of Labor, US Census Bureau 10.0 7.3 0 2 4 6 8 10 12
  • 8. Source: US Census Bureau, Scotiabank Group 0 100 200 300 400 500 600 700 800 Residential Nonresidential Billion US$ 0 2 4 6 8 10 12 14 16 18 20 Million Units Recovery in Auto Sales and Residential Construction US Economic Indicators Light Vehicle Sales Construction Expenditures
  • 9. Agriculture Update
  • 10. Source: Bloomberg $/bushel Wheat $/bushel Soybeans $/bushel Corn Supportive Prices Despite Some Near-term Pressure Crop Prices 0 1 2 3 4 5 6 7 8 Dec. 13 Futures 10-year Average 0 2 4 6 8 10 12 14 16 18 Nov. 13 Futures 10-year Average 0 1 2 3 4 5 6 7 8 9 10 11 12 Near-month Futures 10-year Average
  • 11. Source: India Meteorological Department Indian Monsoon Situation Strong Monsoon Encouraging for Farmers Percentage of Normal Monsoon Rain (June to Sept.) 0% 20% 40% 60% 80% 100% 120% 2003 2005 2007 2009 2011 2013
  • 12. Source: USDA Crop Explorer Challenging Weather Patterns Negatively Impacts Crop Production China Affected By Regional Floods and Drought Seasonal Percent of Normal Precipitation Excess Moisture Moisture Deficiency
  • 13. Source: USDA Million Tonnes Rice Million Tonnes Wheat Million Tonnes Corn Expect Significant Imports to Meet Rising Consumption China’s Grain Imports 0 2 4 6 8 10 0 2 4 6 8 10 0 2 4 6 8 10 2013F refers to the 2013/14 crop year.
  • 14. Source: Ministry of Agriculture for China China’s Agricultural Products Import Bill 0 20 40 60 80 100 120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Billion US$ Import Bill Has Increased Rapidly Over the Past Five Years
  • 15. Source: USDA 2013F refers to the 2013/14 crop year. -30 -20 -10 0 10 20 30 40 IA ND CO WI KS MN MS NE IL SD TX MI IN PA OH KY NC TN Percent 0 5 10 15 20 25 0 2 4 6 8 10 12 14 16 2003 2005 2007 2009 2011 2013F Production Stocks-to-Use Billion Bushels Yield and Acreage Uncertainty Due to Late Developing Crop US Corn Supply/Demand and Crop Condition US Corn Supply and Demand US Good/Excellent Corn Rating – Current versus 10-year avg. Stocks-to-Use - Percent
  • 16. Source: USDA Production - Million Tonnes Higher Stocks Contingent on Large South American Crops World Soybean Production and Stocks-to-Use 0 5 10 15 20 25 30 35 40 0 50 100 150 200 250 300 2003 2005 2007 2009 2011 2013F World Stocks-to-Use Based on crop year data. For example, 2013F refers to the 2013/14 crop year. Stocks-to-Use - Percent
  • 17. Expect Fertilizer Will Remain Very Affordable in 2013/14 Fertilizer Year Fertilizer Cost Percentage of US Corn Revenue Source: USDA, DTN, PotashCorp 0 5 10 15 20 25 04 05 06 07 08 09 10 11 12 13E 14F Potash Phosphate Nitrogen Total $4.00/bushel 2014 Corn Price Scenarios $4.75/bushel $5.50/bushel Percent
  • 18. Source: Safras, Soybean & Corn Advisor -30 -20 -10 0 10 20 30 40 50 60 Soybeans Corn Gross Margin Percentage Returns Favor Soybean; Expect Slow Down in Corn Planting Brazil Crop Economics
  • 19. Source: USDA, CONAB, PotashCorp Million Acres Strong Soybean Economics Drives Expected Increase in Planted Area Brazil Crop Area 0 20 40 60 80 100 120 Soybeans Corn - Full Season Corn - Safrihna Wheat
  • 20. Potash Market Update
  • 21. Source: Fertecon, CRU, IFA, PotashCorp 0 5 10 15 20 Latin America China Middle East Europe North America FSU Historical Maximum Production, Million tonnes KCl North America and FSU Are Major Potash Producing Regions World Potash Producing Region Profile
  • 22. Source: IFA, PotashCorp IFA derives operational capability by multiplying capacity by the highest historical achievable operating rate. 50 55 60 65 70 75 80 85 90 2012 2013F 2014F 2015F 2016F IFA Forecast as of May 2013 IFA Forecast as of May 2012 Million Tonnes KCl Equivalent Significant Project Delays and Deferrals IFA Potash Operational Capability Outlook 8 million tonnes
  • 23. Source: Fertecon, CRU, Public Filings, PotashCorp * Estimated annual achievable production level from existing operations; announced probable and possible projects; assuming typical ramp-up periods for new capacity. Probable and possible projects based on PotashCorp’s view of project probabilities. 63.0 76.8 0 10 20 30 40 50 60 70 80 2012 2013 2014 2015 2016 2017 Total 2017F World PotashCorp Other North America FSU Other Million Tonnes KCl PotashCorp Adding Majority of New Capacity Global Potash Operational Capability*
  • 24. Source: IPNI, PotashCorp Million Tonnes KCl Strong Offshore Shipments During First Eight Months of 2013 North American Potash Producers’ Export Sales 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 2013 2012 5-year avg.
  • 25. Source: IPNI, TFI, PotashCorp Thousand Tonnes KCl 0.0 0.2 0.4 0.6 0.8 1.0 1.2 2013 5-year avg. Million Tonnes KCl Low Distributor Inventory and Agronomic Need is Expected to Drive Demand North America Potash Shipments Domestic Producer Shipments Offshore Imports 0 20 40 60 80 100 120 140 2013 5-year avg.
  • 26. Source: USDA, AAPFCO, PotashCorp Million Short Tons KCl EquivalentMillion Short Tons KCl Equivalent Application Rates Have Not Kept Pace With Higher Crop Removal US Potassium Application and Crop Removal US Total Regional Application Deficit – 2010 0 2 4 6 8 10 12 14 16 1975 1980 1985 1990 1995 2000 2005 2010 Crop removal Fertilizer applied Calculation based on commercial fertilizer application data, estimated nutrients available from manure and crop removal rates for all major crops grown in the US. 3.7 1.4 0.7 0.7 0.6 0.6 0.4 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 ~ 8.0 million st
  • 27. Phosphate Market Update
  • 28. Source: Fertecon, CRU, PotashCorp 0 10 20 30 40 50 60 70 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F India China Other Asia Latin America North America Other Million Tonnes Product Indian Demand Has a Significant Impact on the Global Market World DAP and MAP Consumption
  • 29. 300 350 400 450 500 550 600 54 56 58 60 62 64 66 68 Source: FAI, Katana, PotashCorp 0 1 2 3 4 5 6 7 Jan Mar May Jul Sep Nov 2013 2012 2011 Cumulative, Million Tonnes Product Government Policy and Foreign Exchange Changes Distorting the Market India DAP Import Economics India DAP Imports Importer Breakeven Price Sensitivity Rupee/USD Scenarios Assuming MRP of 22,500 US$/Tonne – CFR India
  • 30. Source: Fertecon, CRU, PotashCorp 0 100 200 300 400 500 Integrated (low) Integrated (high) Non-integrated Total cash cost Freight and export tax costs FOB China 60% 11% 5% 4% 4% 16% Emerged as a Major Supplier to India But Some Producers Are High Cost China Phosphate Market Profile 2012 DAP/MAP Exports by Destination China DAP Export Costs India Vietnam Pakistan Latin America Other Oceania 2012 Exports – 4.8 million tonnes US$/Tonne Higher cost integrated producers typically have higher rock transportation costs.
  • 31. 0 200 400 600 800 1,000 1,200 11 12 13 11 12 13 11 12 13 11 12 13 MAP DAP TSP SSP Production Imports Source: Potafertz, PotashCorp Thousand Tonnes P2O5 (YTD Jan-Jul) Increased Phosphate Supply During the First Half of 2013 Brazil Phosphate Fertilizer Domestic Supply
  • 32. Source: IPNI, TFI, PotashCorp 0 100 200 300 400 500 600 700 2013 5-year avg. Short-term Buying Lull Prior to the Fall Season US DAP/MAP Shipments 0 20 40 60 80 100 120 140 160 2013 5-year avg. Thousand Tonnes DAP/MAP Thousand Tonnes DAP/MAP Offshore ImportsDomestic Producer Shipments
  • 33. Nitrogen Market Update
  • 34. Source: Fertecon, PotashCorp 0 1 2 3 4 5 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011 FSU Middle East Trinidad North Africa Million Tonnes Ammonia Supply Has Been Constrained in Major Exporting Regions Ammonia Exports by Major Region
  • 35. -2 0 2 4 6 8 10 12 14 16 18 2008 2010 2012 2014F 2016F Middle East and Africa Americas FSU Other China Source: Fertecon, CRU, PotashCorp Million Tonnes Near-term Surge in Chinese Capacity; Several Proposed Projects in Medium-term World Urea Capacity Additions
  • 36. 0% 20% 40% 60% 80% 100% 0 20 40 60 80 100 Production Capacity Operating Rate Source: CRU, PotashCorp Operating Rate - PercentProduct - Million Tonnes Near-term Over Supply in Chinese Market China Urea Supply and Demand
  • 37. 200 240 280 320 360 Natural Gas Thermal Coal (L) Anthracite (L) Anthracite (M) Anthracite (S) Total cash cost Freight and export tax costs FOB China Source: Fertecon, CRU, PotashCorp L refers to large-scale producers, M refers to medium and S refers to small. US$/Tonne Wide Range of Costs Depending on Feedstock and Plant Type Chinese Urea Export Costs
  • 38. 0 50 100 150 200 250 300 350 400 US Middle East Russia China (Coal) Ukraine (Port) Delivered… 0 100 200 300 400 500 600 Delivered Cost… Source: Fertecon, PotashCorp Note: Cost of production estimates based on natural gas price forecast for 2013. US$/TonneUS$/Tonne Production Costs Remain High In Several Key Nitrogen Producing Regions Delivered Cash Costs to the US Market Ammonia Urea
  • 39. There’s more online: PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter Thank you