The Potash Outlook. Al Mulhall Director, Market Research - PotashCorp. November 2, 2005

Transcription

1

2 The Potash Outlook Al Mulhall Director, Market Research - PotashCorp TFI Outlook Meeting November 2, 25

3 Forward-Looking Statements This presentation contains forward-looking statements, which involve risks and uncertainties, including those referred to in the Company s annual report to shareholders for 23 and in filings with the U.S. Securities and Exchange Commission and Canadian provincial securities commissions. A number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, fluctuation in supply and demand in fertilizer, sulfur and petrochemical markets; changes in competitive pressures, including pricing pressures; risks associatedated with natural gas and other hedging activities; changes in capital markets; changes in currency and exchange rates; unexpected geological or environmental conditions and government policy changes.

4 The Potash Outlook Global Fundamentals Global Potash US Fundamentals US Potash

5 The Potash Outlook Global Fundamentals

6 N, P & K Outlook Good Fundamentals Declining land per capita Strong economic growth Tight global grain supply/demand balance China having a strong impact on demand for grains, oilseeds and ocean freight Recent commodity price growth

7 Land Available to Agriculture is Declining.4 Hectares of Arable Land Per Person F 22F Source: FAO, PPI, PotashCorp

8 World Economic Growth 6 % Annual Real GDP Growth 5 Strongest Growth in Over 3 Years E Source: IMF

9 World Economic Growth 5 Real GDP Growth - % CAGR 4 4.5% 4.3% 3 3.5% Source: IMF

10 World Grain Production & Consumption Wheat and Coarse Grains 1.7 Billion Tonnes Record Production Above Normal Weather Production Consumption Production Gap Production Gaps Possibly More Common / /86 199/ /96 2/1 25/6F 21/11F Source: USDA, PotashCorp

11 World Grain Stocks Wheat and Coarse Grains 6 Million Tonnes Year-End Grain Stocks Stocks-to-Use Ratio Percent % /74 77/78 81/82 85/86 89/9 93/94 97/98 1/2 5/6F 1 Source: USDA

12 China s s Grain Production & Consumption Wheat and Coarse Grains 28 Million Tonnes Production Forecast Use 24 Production Gap /99 /1 2/3 4/5 6/7F 8/9F Source: USDA, PotashCorp

13 China s s Grain Ending Stocks* 24 Million Tonnes Stocks Stocks-to-Use Ratio Stocks-to to-use Ratio /62 65/66 69/7 73/74 77/78 81/82 85/86 89/9 93/94 97/98 1/2 5/6F Source: USDA * Wheat and corn

14 Agricultural Commodity Prices Index 199 = Grains -rice -wheat -maize -sorghum Oilseeds -soybeans -palm oil -coconut oil Beverages -coffee -cocoa -tea Other Food -bananas -oranges -sugar Other Raw Materials -cotton -rubber -wool Yrs Ago 1 Yr Ago Q Yrs Ago 1 Yr Ago Q Yrs Ago 1 Yr Ago Q Yrs Ago 1 Yr Ago Q Yrs Ago 1 Yr Ago Q3 25 Source: World Bank

15 US Net Cash Farm Income US $Billions US farmers are beginning to feel the pinch of rising costs but have enjoyed record net cash farm income over the past few years and 25 should be another record or near record year. 9 Net Cash Income Before Gov,t Payments Direct Government Payments E Source: USDA August 25

16 The Potash Outlook Global Fundamentals Global Potash Outlook

17 N, P & K Outlook Potash Key Points Industry government ownership The global players Global potash demand growth Regional potash demand growth Global potash production growth FSU & China World supply/demand balance

18 Industry Structure - Ownership Type Non-Government Ownership 34% State-Controlled 66% 14% Government Ownership 86% Publicly Traded or Jointly Held Stock Companies Source: PotashCorp

19 World Potash Exporters - 24 By Country Million Tonnes KCl 4% 12 1 Top 3 Exporters (24) = 75% of total exports % 17% 1% 8% 4% 3% Canada Russia Belarus Germany Israel Jordan Others Source: Fertecon

20 World Potash Importers - 24 By Country 1 Million Tonnes KCl % Imports as a % of a country s total sales % 91% Top 3 Importers (24) = 53% of total imports % 2 1 1% 1% US China Brazil India France Malaysia Source: Fertecon

21 World Potash Demand Growth Cumulative YOY Percentage Growth 3.6% 1H 25 1.% 3% Growth Rate 2% Growth Rate % % 3.8% -.6% E 26F 27F 28F 29F 21F Source: IFA, PotashCorp

22 Asia and Latin America Potash Demand Cumulative Growth 12 Million Tonnes KCl Asia Latin America MMT MMT MMT Source: Fertecon

23 Potash Imports for Selected Countries 25E 1 Million Tonnes KCl Brazil China Other Asia India F F F F Source: Fertecon, PotashCorp

24 Brazilian Real per US Dollar.5 Real per US Dollar Jul-3 Oct-3 Jan-4 Apr-4 Jul-4 Oct-4 Jan-5 Apr-5 Jul-5 Oct-5 Source: Oanda.com Exchange rates are those in effect on the first day of the month

25 Cost of Producing Soybeans in Brazil and US US$/Acre Seed Fertilizer Costs Other Variable Land Costs Depn&Other Fixed Costs $215/acre Brazil (25) Labor, taxes and machinery costs are cheaper in Brazil Land costs have risen sharply with the price of soybeans but are still a fraction of the US Chemicals, fuel cost more than the US including $5/ha to fight Asian Rust Fertilizer costs have risen and are more than the US $255/acre US(25) Excludes a possible extra $25/acre cost for fungicide to fight Asian Rust Source: USDA, Doane, PotashCorp

26 Potash Imports for Selected Countries 25E 1 Million Tonnes KCl Brazil China Other Asia India F F F F Source: Fertecon, PotashCorp

27 China s s Potash Demand Growth Million Tonnes KCl Production Imports F Source: Fertecon, PotashCorp

28 Canpotex s s Sales Volume Million Tonnes KCl Records F Source: Canpotex

29 FSU Potash Sales and Capacity 2 16 Million Tonnes KCl Domestic Sales Export Sales New Capacity Source: Fertecon, PotashCorp

30 FSU KCl Production 9 8 Million Tonnes KCl Belarus F Source: Fertecon, IFA, PotashCorp Uralkali F Silvinit F

31 North American Producers Ending KCl Inventory 3. Million Tonnes KCl Year Average % Below 5-Year Average.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: PPI

32 Selected Nations Potential Potash Growth Million Tonnes KCl 3 China 12 India 12 Brazil Current Potential Current Potential Current Potential Source: Fertecon, ANDA, PPI-PPICPPIC Note: K 2 O tonnes divided by.61 to convert to KCl tonnes

33 World Potash Fertilizer Consumption 35 3 Million Tonnes K 2 NAmerica Asia LAmerica WE Africa Oceania EE FSU 25 2 FSU EE 15 WE L America 1 Asia 5 North America 61/62 67/68 73/74 79/8 85/86 91/92 97/98 '3/4 9/1F Actual Forecast Source: FAO, Fertecon

34 World Potash Operating Rate (%) 1 % of Capacity Actual With PotashCorp Forecast With PotashCorp Actual Without PotashCorp Forecast Without PotashCorp * excludes capacity additions in planning stage for Thailand, Uralkali, and Mosaic Source: Fertecon, IFA, PotashCorp

35 Potash Demand Growth versus Capacity: Assumes All Capacity Announcements Completed Cumulative Growth - Million Tonnes KCl PotashCorp: Available Capacity PotashCorp Projects Under Review Uralkali Jordan Brazil Germany Israel China Mosaic Agrium 3% Demand Growth 2 % Growth 25E 26F 27F 28F 29F 21F Source: Fertecon, PotashCorp

36 The Potash Outlook Global Fundamentals Global Potash US Fundamentals

37 US Crop Acreage Forecast Million Acres Doane s 26 Forecast More wheat and soybeans less corn and cotton due to rising costs and the higher returns to soybeans. Also there is so far little evidence of Asian Rust /- Corn All Wheat Soybean Cotton Source: USDA and Doane's Forecast

38 The Potash Outlook Global Fundamentals Global Potash US Fundamentals US Potash Outlook

39 Ammonia Costs Depend on Gas Costs 5 45 US$/ST Gas Costs Conversion Costs 4 35 Current Tampa Ammonia Price ($328/st) Gas Cost per Million Btu Source: TFI, Fertecon, PotashCorp

40 US Fertilizer Consumption Forecast Million Tons Nutrient Sharp Increase in 23/4 Due to exceptional weather, favorable crop prices and better reporting Down slightly in 24/5 Due to more normal weather and a decline in crop prices Down 3-5% Due to high gas prices, US market resistance to nitrogen prices, and reduced corn acreage. 23/4 YOY% 24/5 YOY% 25/6 Range K2O % to -2% to -5% Source: AAPFCO and PotashCorp 24/5 Estimates and 25/6 Forecast

41 The Potash Outlook Conclusion Industry government ownership is low Industry operating rates are high Global potash demand growth to average 2-3% 2 US market carries risk of 3-5% 3 drop from last year Market outlook is for continued tight supply/demand

42