TORONTO (miningweekly.com) – Markets for potash might have seized up at the end of last year and into 2012, but demand will likely bounce back equally quickly, Potash Corp CEO Bill Doyle said on Thursday.

“This business turns on a dime,” the head of the world’s biggest fertiliser producer said on a conference call, discussing fourth-quarter financial results that missed analysts expectations.

While the first three quarters of 2011 had shown strong demand growth for potash producers, with most running at full tilt, the European debt crisis that shook markets in September caused farmers, which Doyle said are among the most skittish consumers, to halt purchases.

Grain prices also saw notable drops in the latter part of the year, having posted strong consecutive gains over 2010 and most of 2011.

The sudden fall-off in demand for Potash Corp’s namesake fertiliser ingredient prompted the company to idle production at some of its Saskatchewan mines, which is set to continue into March.

Russia’s OAO Uralkali, the biggest European producer, said this week it was also prepared to curb output.

Evergreen potash-bull Doyle is undaunted, however.

“We think this market is going to get going all at once and turn on a dime again,” he said, adding this was likely to start happening in the North American spring planting. Earlier this week, he put Potash Corp’s money where his mouth is, doubling the company’s dividend to $0.14 a share.

“We look for 2012 to be another really good year for the company and 2013 will also be an exceptional year,” commented Doyle.

The majority of potash, or potassium chloride, is traded through contracts that Canpotex – a cartel comprising Potash Corp, Mosaic and Agrium – negotiates with its customers in the US, Brazil, China and India.

Last year, tough haggling with Indian buyers prolonged an agreement until the second half.

Doyle said that price talks with China were set to start as soon as the New Year celebrations in the country are over, and that he does not expect they will go on for longer than usual.

“My best guess is we’ll have something by the end of March,” he said.

Potash Corp is about 70% through its large capital expansion programme, which continues despite the short-term demand decrease.

Doyle repeated his views that countries such as India and China face challenges in keeping their populations fed, and that farmers will need to apply more fertilisers to boost yields.

The world would need at least two years of “dramatic increases in food yields” to even begin to address food supply risks, he added.

Shares in Potash Corp rose 1.1% to close at C$45.99 on the TSX.
 

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.