Potash Outlook Presentation

Transcription

1 Potash Outlook Presentation TFI Outlook Conference November 16, 2011 Yao Yao Manager, Market Research Source: from view PotashCorp.com menu, turn off if not needed

2 Forward-Looking Statements This presentation contains forward-looking statements or forward-looking information (forward-looking statements). 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 to differ materially from those expressed in the forward-looking statements, including, but not limited to: fluctuations in supply and demand in fertilizer, sulfur, transportation and petrochemical markets; 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 with major markets; the European sovereign debt crisis, the recent downgrade of US sovereign debt and political concerns over related budgetary matters; timing and amount of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets and corresponding effects on the company's investments; changes in currency and exchange rates; unexpected geological or environmental conditions, including water inflow; potential adverse developments in new and pending legal proceedings or government investigations; strikes or other forms of work stoppage or slowdowns; changes in, and the effects of, government policies and regulations; 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, 2010 under the captions "Forward-Looking Statements" and "Item 1A Risk Factors" and in our other filings with the US Securities and Exchange Commission and Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this presentation 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.

3 Potash Demand Drivers

4 World Grain Production and Consumption Grain Production Has Not Kept Pace With Rising Demand Billion Tonnes 1.9 Consumption Production E 11F Based on crop year data. For example, 11F refers to the 2011/12 crop year. Light bars reflect years when consumption exceeds production. Source: USDA

5 World Grain Stocks-to-Use Ratio Grain Inventories Expected to Remain Tight Beyond 2012 Percent 40 Historical 25-Year Average Production Growth Rate Scenarios 6% (~3X Historical Rate) 4% (~ 2X Historical Rate) 2% (~ Historical Rate) E 12F Based on crop year data. For example, 11F refers to the 2011/12 crop year. Source: USDA, PotashCorp

6 US Corn Supply and Demand Corn Stocks Reduced to Historically Low Levels Billion Bushels Stocks-to-Use - Percent 14 Production Consumption 25 Historical 10-Year Average F F 2011F refers to the 2011/12 crop year Source: USDA

7 World Crop Prices and Potash Use Prices Are Strong for Many Potash-Intensive Crops World Crop Prices World Potash Use by Crop October 2011 Percentage Increase Compared to Average Rubber Coffee Other Crops 14% Sugar Corn Rice Cotton 2% Sugar 9% 34% Grains Cotton Palm Oil Soybean Wheat Tea Bananas Cocoa 22% Fruits & Vegetables 16% 3% Corn Ethanol Oilseeds Source: World Bank, IFA, USDA, PotashCorp

8 Fertilizer Cost Percentage of Crop Revenue Expect Fertilizer Cost Percentage Will Remain Below Historical Levels Percent E Brazil Soybean US Corn China Rice India Wheat Source: USDA, IPNI, PotashCorp

9 Potash Impact on Crop Yield and Return Balanced Fertilization Can Provide a Significant Economic Return Yield Attributed to Potash* - Percent Return per Dollar Spent on Potash* - US$ Year Average 0 Malaysia Oil Palm Brazil Soybean US Corn 0 Malaysia Oil Palm Brazil Soybean US Corn * Based on long-term yield trials Source: IPNI

10 Potash Market Overview

11 World Potash Production and Demand Major Consuming Markets Are Heavily Dependent on Imports 19.0 Million Tonnes KCl Europe 5.5 FSU North America 8.6 Asia Middle East Africa Domestic Sales Latin America 22% Production Demand Source: Fertecon, PotashCorp Potash Trade 78% 0.5 Oceania

12 Potash Shipments by Selected Market Expect Record Global Demand Despite Reduced Shipments to India Million Tonnes KCl China India Other Asia Latin America * Record year previous to 2011 North America Source: Fertecon, PotashCorp

13 North American Potash Use and Crop Production Corn Is the Largest Potash Consumer Potash Use by Crop Grain and Oilseed Production Million Tonnes All Other Crops 28% 44% Corn Grains Oilseeds Fruits & Vegetables 6% Cotton 3% 5% Wheat 14% Soybeans E 2010E refers to the 2010/11 crop year Source: IFA, FAO, USDA, PotashCorp

14 Potash Market Profile North America Domestic Producers Supply Majority of North American Demand 2010 Shipment Profile Potash Shipment Profile US Other FSU 9% 2% 11% Million Tonnes KCl Shipment Range Domestic Producer Shipment Offshore Imports % Canada 2010 Shipments 10.2 million tonnes F Source: Fertecon, IPNI, PotashCorp

15 North American Potash Producer Shipments and Inventories Strong Demand Has Tightened Inventory Levels Shipments (12-Month Rolling Average) Million Tonnes KCl Producer Ending Inventory Million Tonnes KCl yr ave Jan Apr Jul Oct Source: Fertecon, IPNI, PotashCorp

16 Latin American Potash Use and Crop Production Corn, Soybean and Sugar Are Major Consumers of Potash Potash Use by Crop Major Crop Production Million Tonnes All Other Crops 19% 18% Corn Sugar Corn Soybeans 120 Fruits & Vegetables 9% Cotton 3% 60 31% 40 Sugar Crops 20% Soybeans E Source: IFA, FAO, USDA, PotashCorp

17 Potash Market Profile Latin America Rising Demand and Limited Domestic Production Capability in Latin America 2010 Shipment Profile Potash Shipment Profile Germany 13% Other 5% 7% Brazil 8% Chile Million Tonnes KCl 12 Import Range Offshore Imports Domestic Producer Shipment 10 Israel 8% % 4 30% Canada 2 FSU 2010 Shipments 8.6 million tonnes F Source: Fertecon, Potafertz, PotashCorp

18 China Potash Consumption and Crop Production Significant Growth in Production of Fruits and Vegetables All Other Crops 13% Sugar Crops 5% Wheat 4% Potash Use by Crop Major Crop Production Million Tonnes 700 Rice Wheat Fruits & Vegetables Rice 28% 50% Fruits & Vegetables E Source: IFA, FAO, USDA, PotashCorp

19 Potash Market Profile - China China s Rising Food Production Needs Drive Long-Term Growth 2010 Shipment Profile Potash Shipment Profile Other Jordan Germany Israel 2% 3%3% 8% 42% China Million Tonnes KCl Domestic Producer Shipment Imports Import Range 8 6 FSU 32% % Canada 2010 Shipments 9.0 million tonnes F Source: Fertecon, Brilliant Pioneer Consultants, PotashCorp

20 India Potash Use and Crop Production Rice and Wheat Account for Nearly Half of Potash Consumption All Other Crops 26% Potash Use by Crop 34% Rice Million Tonnes Major Crop Production Rice Wheat Fruits & Vegetables Fruits & Vegetables 22% 8% 10% Wheat Sugar Crops E Source: IFA, FAO, USDA, PotashCorp

21 Potash Market Profile - India India Relies on Potash Imports to Meet Rising Demand 2010 Shipment Profile Potash Shipment Profile Jordan 14% Other 2% 19% Canada Million Tonnes KCl 7 Imports 6 Import Range Germany 3% 5 4 Israel 19% % 1 FSU 2010 Shipments 6.3 million tonnes F Source: Fertecon, FAI, PotashCorp

22 Other Asian Potash Use and Crop Production Oil Palm Is the Major Driver of Potash Demand Fruits & Vegetables All Other Crops 11% Potash Use by Crop 12% Million Tonnes Key Crop Production Palm Oil Rice Fruits and Vegetables Sugar Crops Corn 6% 5% Rice 21% 45% Oil Palm E Source: IFA, FAO, USDA, PotashCorp

23 Potash Market Profile Other Asia Demand Is Rising for Other Asia Region s Potash-Intensive Crops 2010 Shipment Profile Potash Shipment Profile Other Jordan 7% 4% Germany 6% Israel 4% 43% Canada Million Tonnes KCl 9 Imports Import Range FSU 36% 2010 Shipments 7.2 million tonnes F Source: IFA, Fertecon, PotashCorp

24 World Potash Shipments and Operating Rate Expect Global Operating Rates to Remain at Historically High Levels Shipments - Million Tonnes KCl Operating Rate* - Percent Shipment Range Shipments Operating Rate F * Based on percentage of operational capability operating rate scenarios based on global shipments of 58 to 60 million tonnes 40 Source: Fertecon, PotashCorp

25 Potash Supply Overview

26 World Potash Producer Profile Largest Producer by Capacity Million Tonnes KCl 2011F to 2015F PotashCorp Uralkali (Russia) Mosaic (Canada,US) Belaruskali (Belarus) ICL (Israel,Spain,UK)* K+S (Germany) China* APC (Jordan)* SQM (Chile)* Agrium (Canada) PotashCorp (Operational Capability) PotashCorp Investments (Capacity) Other Producers (Capacity) Announced Expansions through 2015 Intrepid (US) Vale (Brazil) * 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

27 Estimated Greenfield Potash Capital Costs Greenfield Projects Require Significant Investment CDN$ Billions $0.0B-$1.0B $4.7B-$6.3B 5.0 $0.6M-$1.2B 4.0 $4.1B Conventional Mine and Mill* Development of Infrastructure** Acquisition of Deposits*** Potential Greenfield Cost * Based on 2mmt per-year conventional mine in Saskatchewan; costs could vary depending on conventional vs. solution mine, depth of ore body, geographic location, and other factors. ** Dependent on geographic location, access and distance to port. Includes railcars, utility systems, port facilities, etc. *** Based on publicly reported cost of recent purchases. Source: AMEC, PotashCorp

28 Saskatchewan Brownfield and Greenfield Costs Brownfield Expansion Advantage Capital Cost per Tonne (CDN$) 3,500 3,000 2,500 Greenfield (Including Infrastructure and reserve cost) Greenfield (Excluding Infrastructure costs) POT Projects In Progress POT Projects Completed 2,000 1,500 1, Brownfield Projects Completed Brownfield Projects in Progress* SK Greenfield** * 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. Source: AMEC, PotashCorp

29 PotashCorp Expansions/Debottlenecking Projects History of Successful Project Execution Facility Investment CDN$ Billions Standard Capacity* Expansions/ Debottlenecking Construction Projects Completed ( ) Rocanville $ MMT Allan $ MMT Lanigan $ MMT Patience Lake $ MMT Cory I $ MMT Total $ MMT Projects in Progress New Brunswick** $ MMT Cory II $ MMT Allan $ MMT Rocanville $ MMT Total $ MMT * Includes, as applicable, both bringing back previously idled capacity and expansions to capacity and does not necessarily reflect current operational capability ** Net capacity increase assuming closure of existing 0.8MMT mine Source: PotashCorp

30 Picadilly (New Brunswick) Expansion Project Aerial View

31 Cory Expansion Project Aerial View

32 Allan Expansion Project Upper Sheave House Hoisted Into Position

33 Rocanville Expansion Project Site Aerial View

34 Thank you. Source: from view PotashCorp.com menu, turn off if not needed