Potash demand and spot market pricing strengthened throughout the first quarter. In North America, demand was robust as fertilizer distributors worked to position product ahead of the spring planting season. Even as shipments from domestic producers climbed 48 percent above those during the same period last year, ongoing rail constraints – precipitated by difficult winter conditions and a record grain harvest in Canada – kept dealer supplies tight. Although demand from Brazil and Southeast Asian countries strengthened, North American producers’ offshore shipments fell slightly below those of the same period last year as logistical challenges constrained their abilities to satisfy all demands for product. Offshore sales were further impacted by delayed supply contracts with Chinese and Indian buyers relative to 2013. Amidst strengthening market fundamentals, potash prices in all spot markets increased from the beginning of 2014 – most notably for granular product – but remained well below those of the comparative period in 2013.
In nitrogen, first-quarter ammonia production in the US reached its highest level in more than a decade as additional capacity came online and producers responded to strong agricultural and industrial demand. While ammonia prices trailed the historically high levels of 2013 – a period characterized by especially strong demand and supply challenges in key producing regions – they moved up sharply as the quarter came to a close. Demand for urea was also robust ahead of the North American spring planting season. With imports lower than those of the previous year, North American supply tightened and urea prices strengthened over the course of the quarter, although key benchmarks remained below those of the same period in 2013.
Production and logistical challenges also impacted global phosphate markets. This was especially true in North America where a combination of supply disruptions and an improved demand environment caused prices for all phosphate fertilizer products to strengthen during the quarter. Despite this move upward, weak market fundamentals through the second half of 2013 kept pricing levels for the quarter below those of the comparative period last year.
Recent potash contracts in China and India as well as a strong order book in key spot markets are expected to create an environment that should support robust shipment levels through at least the next two quarters. While we are beginning to see an improvement in rail deliveries help address the backlog of orders from the first quarter, significant product demands are expected to keep pressure on North American carriers. We continue to work closely with our transportation partners to minimize disruptions although these conditions are expected to result in ongoing tight global market fundamentals. For the full year, we maintain our view that global potash shipments could be in the range of 55-57 million tonnes.
In North America, we expect strong demand at the farm level to continue and securing potash to remain a top priority for distributors. With rail carrier backlogs limiting producers’ ability to recharge warehouse systems, sales volumes for the second quarter could be constrained – although the delayed start to the spring planting season is expected to provide some relief. For the full year, we maintain our view that total shipments to North America could approximate 9-9.5 million tonnes.
Potash demand in Latin America is expected to remain strong as farmers strive to increase crop production by planting more acres and enhancing soil fertility. We anticipate imports to this market will accelerate through the second quarter and remain robust through the seasonally strong July to October period. For the year, we forecast potash shipments to Latin America of approximately 10.5 million tonnes, including what could be record demand from Brazil.
With first-half Chinese contracts in place for all major global potash suppliers – including Canpotex –shipments to this market are expected to accelerate through the second quarter. First-half volume commitments are likely to meet a significant portion of China’s estimated import needs for 2014, and we anticipate a modest level of additional seaborne imports will be required during the second half. For the full year, we forecast total demand will approximate 11.5 million tonnes.
In India, the recent settlement of new supply contracts – including a 1 million tonne agreement with Canpotex – is expected to provide a base load of tonnage through the remaining three quarters of 2014. While fertilizer subsidies continue to remain a near-term challenge in achieving more robust demand levels, we expect 2014 shipments to India will approximate 3.5-4.0 million tonnes, exceeding the 2013 total.
In Other Asian countries (outside of China and India), low inventories and supportive crop prices are expected to help generate stronger demand in 2014. We forecast total potash shipments in the range of 8.0-8.3 million tonnes, exceeding those of 2013.