World potash consumption will slump by more than 10% this year, hit by “cautious buying” in the face of high prices, producer Nutrien said, blaming the downturn for a cut to its earnings hopes.
The farm retail-to-fertilizer group, which is responsible for some 20% of world potash output, cut to 60m-62m tonnes its forecast for world potash shipments in 2022.
That compares with a previous estimate of 61m-62m tonnes, and the 68m-71m tonnes at which the group initially forecast industry potash exports this year.
The downgraded forecast puts a drop of up to 10m tonnes in potash shipments on the cards for 2022, a historically huge downturn, and one which will be felt by the company itself in terms of reduced sales volumes.
Nutrien cut to 12.5m-12.9m tonnes its forecast for its sales this year, from previous guidance of 14.3m-14.9m tonnes, and implying a decline from the 13.6m tonnes achieved in 2021.
Nutrien shares plunged by 13.3% lower to $73.47 in early trading in New York.
‘Temporary reduction in purchasing’
The drop in industry potash shipments expected this year reflects in part supply setbacks, in terms of the knock-on effects of the Ukraine war on exports from Russia and from its ally Belarus.
Nutrien forecast a 20-25% fall in Russian shipments this year, and 50-60% slump in Belarusian volumes.
However, Ken Seitz, the Nutrien chief executive, also acknowledged some demand softness evident in a “temporary reduction in potash purchasing” in North America and Brazil.
In both geographies, the group reported “cautious” potash buying, a trend enabled in North America by a “high” level of inventory, in turn a reflection of a wetness-hampered spring sowing season which curtailed application rates.
North American demand this year will fall to 8.0m-9.0m tonnes, below a previous forecast of 9.0m-10.0m tonnes, and representing a decline of some 3m tonnes year on year.
‘Pent-up demand’
Nonetheless, Nutrien was upbeat on prospects for demand ahead, seeing global shipments recover to 64m-67m tonnes next year, including 15m tonnes of its own production.
“We expect robust agricultural fundamentals will support increased potash consumption in 2023, and believe pent-up demand will emerge as inventories are drawn down and prices stabilise,” the group said.
Prices have already fallen below August tops, particularly in Brazil, where Nutrien reported values slipping below $600 per tonne, compared with a high of nearly $1,200 per tonne.
Below forecasts
Nutrien’s own sales volumes for the July-to-September quarter fell by 16.4% to 3.17m tonnes – although, thanks to a more than doubling in prices to $633 per tonne, achieved a 69% rise to $2.00bn in revenues.
Underlying ebitda in potash rose by 71% to $1.38bn.
Group adjusted ebitda rose by 50% to $2.47bn, with growth too in nitrogen and phosphate results offset in part by a 19% fall to $235m in the result for the farm retail division, squeezed by higher product costs.
Earnings more than doubled, to $1.58bn, equivalent to $2.51 per share, on an adjusted basis, well below the $3.97-per-share result that investors had expected.
The group also downgraded to $13.25-14.50, from $15.80-17.80 per share, its forecast for full-year earnings per share.