Fertilizer Market Trends and Outlook December 1, 213 Jeff Holzman Director, Market Research PotashCorp.com
Forward-looking Statements This 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 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 1-K for the fiscal year ended December 31, 212 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 release and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Agriculture and Fertilizer Market Update
World Crop Production Rising Crop Production Drives Need for Increased Fertilizer Use Cereals Million Tonnes 25 2 15 1 5 Oilseeds Million Tonnes 2 175 15 125 1 75 5 25 Fruits & Vegetables Million Tonnes 18 15 12 9 6 3 197 198 199 2 21 197 198 199 2 21 197 198 199 2 21 Source: FAO
World Fertilizer Consumption Rise in Consumption Tied to Crop Production; Political and Economic Events Make for Uneven Growth Nitrogen Million Tonnes Phosphate Million Tonnes Potash Million Tonnes 11 5 3 1 9 8 7 6 5 4 3 2 1 4 3 2 1 25 2 15 1 5 197 198 199 2 21 197 198 199 2 21 197 198 199 2 21 Source: IFA, Fertecon
World Fertilizer Consumption by Region and Crop Potash Has Most Diversity Amongst Regions and Crops Fertilizer Consumption by Region Percent Fertilizer Consumption by Crop 1 8 China Other Asia North America India Latin America All Other 2% Corn 16% 6 Sugar Crops 4% 16% Wheat 4 2 Fruits & Vegetables 15% 1% 5% 14% Rice Nitrogen Phosphate Potash Oilseeds Other Grains Source: IFA, Fertecon, PotashCorp
US Fertilizer Consumption Profile Corn is the Major Driver of US Fertilizer Consumption Fertilizer Consumption Million Tons Fertilizer Consumption by Crop 14 Nitrogen Phosphate Potash 12 1 All Other 34% 8 6 49% Corn 4 2 Oilseeds 6% 11% Wheat Source: IFA, AAPFCO, PotashCorp
US Corn Supply/Demand Expect Record Production and Improved Demand Prospects Billion Bushels 16 14 12 1 8 6 4 2 Stocks-to-Use - Percent Use Production Stocks-to-Use 25 2 15 1 5 23 25 27 29 211 213F 213F refers to the 213/14 crop year. Source: USDA
US Ethanol Profile EPA Lowers Mandate but Positive Margins Could Support Additional Production Producer and Blender Margins Cents/Gallon Iowa Plant Margin Chicago Blender Margin US Corn Ethanol Use (Billion Gallons) Consumption Exports 15 1 8 12 6 4 2 Jan-1 Nov-1 Sep-11-2 -4 Jul-12 May-13 9 6 3 1 11 12 13F 14F Source: EIA, PIRA, ProExporter, PotashCorp
US Weekly Corn and Soybean Export Commitments Strong Recovery in Offshore Demand for US Corn and Soybeans Corn Export Commitments Million Tonnes, Cumulative 213 212 Prev. 5-yr Avg. 45 4 35 3 25 2 15 1 5 Soybean Export Commitments Million Tonnes, Cumulative 45 4 35 3 25 2 15 1 5 213 212 Prev. 5-yr Avg. 4 8 12 16 2 24 28 32 36 4 44 48 52 Shipping Weeks, September 1 to August 31 4 8 12 16 2 24 28 32 36 4 44 48 52 Shipping Weeks, September 1 to August 31 Source: USDA
South America Crop Production Soybean Production Expected to Rise; Corn Output to Decline Soybean Production Corn Production Million tonnes Percent Share Million tonnes Percent Share 16 Production Global Trade Share 6% 12 Production Global Trade Share 6% 14 58% 1 5% 12 1 8 6 4 2 56% 54% 52% 5% 48% 8 6 4 2 4% 3% 2% 1% 3 5 7 9 11 13F 46% 3 5 7 9 11 13F % Source: USDA, PotashCorp
US Crop Acreage Expect Some Acreage Shifts in 214 Corn 1 Million Acres Soybeans 1 Million Acres Wheat 1 Million Acres 9 9 9 8 8 8 7 7 7 6 6 6 5 5 5 4 4 4 3 3 3 Lighter shaded area refers to forecast range for 214. Source: USDA, PRX, Doane, PotashCorp
Crop and Fertilizer Price Index Significant Economic Incentive for Increased Fertilizer Usage Price Index (25 Average = 1) 45 4 35 3 25 2 15 1 5 Crop Price Index* Fertilizer Price Index** Jan-5 Jan-7 Jan-9 Jan-11 Jan-13 * Based on corn, soybean and wheat prices (weighted by global consumption) ** Based on urea, DAP and KCl prices (weighted by global consumption) Source: Bloomberg, PotashCorp
Potash Market Update
World Potash Reserves* Economically Mineable Deposits Are Geographically Concentrated Canada 46% US 1% Germany 1% Russia 35% Belarus 8% China 2% Israel.5% Jordan.5% Brazil 3% Chile 2% * Share of world s potash reserves; reserves as defined by the US Geological Survey Other countries total 1 percent Source: US Geological Survey
World Potash Trade Major Exporters and Importers Exports Million Tonnes KCl Imports Million Tonnes KCl 18 15 12 9 6 3 Canada Russia Belarus Germany Israel Jordan 8 7 6 5 4 3 2 1 World trade was approximately 44 million tonnes in 211. Approximately three-quarters of global production is traded. Source: Fertecon, Industry publications, PotashCorp
World Potash Producer Profile Majority of the Capacity Increases Are Expected From Existing Producers Million Tonnes KCl 213-217F PotashCorp Uralkali (Russia) Mosaic (Canada,US) Belaruskali (Belarus) ICL (Israel,Spain,UK)* China* K+S (Germany) Agrium (Canada) APC (Jordan)* SQM (Chile)* Intrepid (US) Vale (Brazil) PotashCorp (Constructed Capability) Other Producers (Capacity) Announced Expansions Through 217 2 4 6 8 1 12 14 16 18 2 * 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
World Potash Shipments Slower Demand Periods Have Been Followed by Robust Growth Million Tonnes KCl 6 5 4 6.5% CAGR 1.4% CAGR 5.5% CAGR 1.7% CAGR 3 2 1 Source: Fertecon, PotashCorp
Potash Shipments to Key Offshore Markets Demand Has Been Relatively Strong in Markets Outside of India Million Tonnes KCl Million Tonnes KCl 35 Latin America China Other Asia* 7 India 3 6 25 5 2 4 15 3 1 2 5 1 28 29 21 211 212 213E 214F** 28 29 21 211 212 213E 214F** * Excludes India. **Forecast per PotashCorp; represents mid-point of range. Source: Fertecon, Industry publications, PotashCorp
North America Potash Shipments Demand Has Strengthened in the Fourth Quarter Domestic Producer Shipments Million Tonnes KCl 1.2 213 Previous 5-Yr Avg 1..8.6.4.2. Offshore Imports Thousand Tonnes KCl 14 213 Previous 5-Yr Avg 12 1 8 6 4 2 November/December shipments based on PotashCorp estimates. November/December imports based on Blue Johnson and PotashCorp estimates. Source: IPNI, TFI, Blue Johnson, PotashCorp
US Potassium Application and Crop Removal Application Rates Have Not Kept Pace With Higher Crop Removal US Total Regional Application Deficit 21 Million Short Tons KCl Equivalent Million Short Tons KCl Equivalent Crop removal Fertilizer applied 16 4. 14 3.5 3.7 12 1 8 ~ 8. million st 3. 2.5 2. 6 4 1.5 1. 1.4 2 1975 198 1985 199 1995 2 25 21.5..7.7.6.6.4 Calculation based on commercial fertilizer application data, estimated nutrients available from manure and crop removal rates for all major crops grown in the US. Source: USDA, AAPFCO, PotashCorp
Phosphate Market Update
World Phosphate Rock Reserves* Large Concentration of Reserves in North Africa & Middle East Russia 2% US 2% Morocco/ WS 75% N. Africa/ME 1% China 6% Peru 1% Brazil <1% Other Africa 3% * Share of world s phosphate reserves; reserves as defined by the US Geological Survey. Total reserves estimated at 67 billion. Source: US Geological Survey
Global Phosphoric Acid Capacity Additions Majority of Capacity Being Developed in Saudi Arabia, Morocco and Brazil Million Tonnes P 2 O 5 6 58.6 5 52.1 4 3 Source: CRU, Fertecon, PotashCorp
World DAP and MAP Consumption Indian and Chinese Demand Has a Significant Impact on the Global Market 7 Million Tonnes Product India China Other Asia Latin America North America Other 6 5 4 3 2 1 23 24 25 26 27 28 29 21 211 212 213F Source: Fertecon, CRU, PotashCorp
World DAP and MAP Trade Demand Recovery in India to Support Global Phosphate Trade World DAP/MAP Exports 25 Million Tonnes China Russia US Morocco Saudi Arabia Other World DAP/MAP Imports Million Tonnes India Brazil Other Asia Other 25 2 2 15 15 1 1 5 5 24 26 28 21 212 214F 24 26 28 21 212 214F Source: CRU, TFI, PotashCorp
US DAP/MAP Use and Inventory Exports Lower Sales Have Resulted in Elevated Inventory Domestic Sales Exports Inventory Million Short Tons, Cumulative Million Short Tons, Cumulative Million Short Tons 7 213 Previous 5-Yr Avg 7 213 Previous 5-Yr Avg 1.4 213 Previous 5-Yr Avg 6 6 1.2 5 5 1. 4 4.8 3 3.6 2 2.4 1 1.2. Source: TFI
Nitrogen Market Update
Ammonia Capacity Projections vs. Actual Additions Global Ammonia Projects Have Faced Delays 24 23 22 21 2 19 18 17 Capacity - Million Tonnes Projected Capacity 1-Year Prior Actual Capacity 16 29 21 211 212 213F Source: Fertecon, PotashCorp
China Urea Exports by Month Impact of China s Export Tax on Urea Trade Volumes Thousand Tonne Urea 1,8 1,6 1,4 1,2 1, 8 6 4 2 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Blue denotes high export tax months; Green denotes low-tax window Source: NDRC of China, CRU, PotashCorp
Delivered Cash Costs to the US Market Production Costs Remain High In Several Key Nitrogen Producing Regions Ammonia US$/Tonne Cost Range 6 5 4 3 2 1 Urea US$/Tonne Cost Range 4 35 3 25 2 15 1 5 US Middle East Russia China (Coal) Ukraine (Port) Note: Cost of production estimates based on natural gas price forecast for 213. Source: Fertecon, PotashCorp
US Cumulative Nitrogen Imports Potential for a Robust Spring 11 Million Short Tons (N basis) 213/214 212/213 Previous 5-Yr Avg 1 9 8 7 6 5 4 3 2 1 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Note: Nitrogen imports include ammonia, urea, and UAN. Source: USDOC, PotashCorp
Potential North American Nitrogen Project Locations Numerous Nitrogen Capacity Announcements; Few Under Construction - High Probability N Projects - Medium Probability N Projects - More Speculative N Projects
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