The Phosphate Outlook The Phosphate Outlook Corey Corey Giasson Giasson , MBA , MBA Manager, Market Research Manager, Market Research PotashCorp PotashCorp 2007 Fertilizer Outlook and Technology Conference 2007 Fertilizer Outlook and Technology Conference Arlington, Virginia Arlington, Virginia November 7, 2006 November 7, 2006
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The Phosphate OutlookThe Phosphate Outlook
Corey Corey GiassonGiasson, MBA, MBAManager, Market ResearchManager, Market Research
PotashCorpPotashCorp
2007 Fertilizer Outlook and Technology Conference2007 Fertilizer Outlook and Technology ConferenceArlington, VirginiaArlington, VirginiaNovember 7, 2006November 7, 2006
ForwardForward--Looking StatementsLooking StatementsThis presentation contains forwardThis presentation contains forward--looking statements. These statements are based on looking statements. These statements are based on certain factors and assumptions as set forth in this release inccertain factors and assumptions as set forth in this release including foreign exchange luding foreign exchange rates, expected growth, results of operations, performance and brates, expected growth, results of operations, performance and business prospects and usiness prospects and opportunities. While the company considers these factors and assopportunities. While the company considers these factors and assumptions to be umptions to be reasonable based on information currently available, they may prreasonable based on information currently available, they may prove to be incorrect. A ove to be incorrect. A number of factors could cause actual results to differ materiallnumber of factors could cause actual results to differ materially from those in the forwardy from those in the forward--looking statements, including, but not limited to: fluctuationslooking statements, including, but not limited to: fluctuations in supply and demand in in supply and demand in fertilizer, sulfur, transportation and petrochemical markets; chfertilizer, sulfur, transportation and petrochemical markets; changes in competitive anges in competitive pressures, including pricing pressures; risks associated with napressures, including pricing pressures; risks associated with natural gas and other hedging tural gas and other hedging activities; changes in capital markets; changes in currency and activities; changes in capital markets; changes in currency and exchange rates; exchange rates; unexpected geological or environmental conditions; and governmenunexpected geological or environmental conditions; and government policy changes. t policy changes. Additional risks and uncertainties can be found in our 2005 annuAdditional risks and uncertainties can be found in our 2005 annual report to shareholders al report to shareholders and in filings with the U.S. Securities and Exchange Commission and in filings with the U.S. Securities and Exchange Commission and Canadian provincial and Canadian provincial securities commissions. Forwardsecurities commissions. Forward--looking statements are given only as at the date of this looking statements are given only as at the date of this presentation and the company disclaims any obligation to update presentation and the company disclaims any obligation to update or revise the forwardor revise the forward--looking statements, whether as a result of new information, futulooking statements, whether as a result of new information, future events or otherwise. re events or otherwise.
The Phosphate Outlook The Phosphate Outlook
Summary of Previous YearSummary of Previous YearOffshore DemandOffshore DemandDomestic ConsumptionDomestic ConsumptionSupplySupplyConclusionConclusion
AgendaAgenda
The Phosphate Outlook The Phosphate Outlook
Summary of Previous YearSummary of Previous YearOffshore DemandOffshore DemandDomestic ConsumptionDomestic ConsumptionSupplySupplyConclusionConclusion
DAP ROI at the Top of the CycleDAP ROI at the Top of the Cycle
1mmt of new P1mmt of new P22OO5 5 capacity (2.2mmt of DAP) capacity (2.2mmt of DAP) $1 Billion$1 BillionCost of New CapacityCost of New Capacity $ 460/mt$ 460/mt
Average Margin (JanAverage Margin (Jan--00 to present)00 to present) $ 5/mt$ 5/mtPayback Period Payback Period 92 years92 yearsROIROI 1%1%
Current Margin ($35/st)Current Margin ($35/st) $ 40/mt$ 40/mtPayback PeriodPayback Period ~12 years~12 yearsROIROI ~9%~9%
And it is currently considered the top of the market !?!And it is currently considered the top of the market !?!
DAP Price at a 15DAP Price at a 15--20% Return20% Return $293$293--320/mt320/mt
Source: British Sulphur, FerteconSource: British Sulphur, Fertecon
Global Net Change DAP/MAP CapacityGlobal Net Change DAP/MAP Capacity
Morocco Morocco +1.7M TPY+1.7M TPY
Other Asia Other Asia 0.0M TPY0.0M TPY
20002000--2006E 2006E
North America North America --5.8M TPY5.8M TPY
FSU FSU +2.0M TPY+2.0M TPY
Central America Central America --1.5M TPY1.5M TPY India India
+2.5M TPY+2.5M TPY
China China +9.8M TPY+9.8M TPY
Oceania Oceania +0.3M TPY+0.3M TPY
Other Africa Other Africa +0.3M TPY+0.3M TPYSouth America South America
--0.1M TPY0.1M TPY
Europe Europe --0.1M TPY0.1M TPY
Global Net Change in DAP/MAP Capacity Global Net Change in DAP/MAP Capacity +9.0M TPY+9.0M TPY
Global Net Change in DAP/MAP Consumption Global Net Change in DAP/MAP Consumption +7.4M TPY+7.4M TPY
Middle East Middle East --0.1M TPY0.1M TPY
Source: British Sulphur, PotashCorpSource: British Sulphur, PotashCorp
2
4
6
8
10
12
14
16
18
20
22
2005 2006E
Million Tonnes Product
US Phosphate Fertilizer CapacityUS Phosphate Fertilizer Capacity
-16%
EstimatedEstimated
Source: TFISource: TFI
US ProducersUS Producers’’ DAP/MAP Ending InventoryDAP/MAP Ending Inventory
0.8
1.0
1.2
1.4
1.6
1.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2005 2006 3-Year Average
Million Tons ProductMillion Tons Product
SeptSept--06 DAP/MAP ending inventory 06 DAP/MAP ending inventory was 1% above the 3was 1% above the 3--yr yr AvgAvg
Source: TFISource: TFI
US DAP/MAP Domestic ShipmentsUS DAP/MAP Domestic Shipments
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
2005 2006 3-Year Average
Million Tonnes ProductMillion Tonnes Product
Cumulative by MonthCumulative by Month
0.0
0.5
1.0
1.5
2.0
2.5
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
2005 2006 3-Year Average
Million Tonnes ProductMillion Tonnes Product
DAPDAP MAPMAP
Domestic DAP shipments Domestic DAP shipments were down 13% on the 3were down 13% on the 3--year year
average, or average, or --383,000mt383,000mt
Domestic MAP shipments Domestic MAP shipments were up 3% above the 3were up 3% above the 3--year year
average, or +44,000mtaverage, or +44,000mt
Source: TFISource: TFI
US DAP/MAP ExportsUS DAP/MAP Exports
0
1
2
3
4
5
6
7
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
2005 2006 3-Year Average
0
1
1
2
2
3
3
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
2005 2006 3-Year Average
Million Tonnes ProductMillion Tonnes Product Million Tonnes ProductMillion Tonnes Product
DAP MAP
DAP exports were down DAP exports were down 4% on the 34% on the 3--year average, year average,
or or --193,000mt193,000mt MAP exports were down MAP exports were down 23% on the 323% on the 3--year average, year average,
or or --463,000mt463,000mt
Cumulative by MonthCumulative by Month
The Phosphate Outlook The Phosphate Outlook
Summary of Previous YearSummary of Previous YearOffshore DemandOffshore DemandDomestic ConsumptionDomestic ConsumptionSupplySupplyConclusionConclusion
AgendaAgenda
Source: FerteconSource: Fertecon
Global DAP/MAP/TSP DemandGlobal DAP/MAP/TSP Demand
0
10
20
30
40
50
60
70
2000 2002 2004 2006E 2008F 2010F
Demand Projected Demand
Million Tonnes Product
+4%+5%
+0%
Source: FerteconSource: Fertecon
Global DAP/MAP/TSP Demand and TradeGlobal DAP/MAP/TSP Demand and Trade
Source: British Sulphur, Fertecon, PotashCorpSource: British Sulphur, Fertecon, PotashCorp
0
2
4
6
8
10
12
2006E 2007F 2008F 2009F 2010F
China S.Arabia Morocco Bangladesh India Other Demand
Million Tonnes ProductMillion Tonnes Product
New DAP Capacity* vs Demand**New DAP Capacity* vs Demand**
*Several projects uncertain, unlikely projects excluded*Several projects uncertain, unlikely projects excluded**Adjustments made to net out North American capacity curtailmen**Adjustments made to net out North American capacity curtailmentsts
Cumulative Growth Cumulative Growth –– Net CapacityNet Capacity
3.2
The Phosphate Outlook The Phosphate Outlook
Summary of Previous YearSummary of Previous YearOffshore DemandOffshore DemandDomestic ConsumptionDomestic ConsumptionSupplySupplyConclusionConclusion
AgendaAgenda
Source: FerteconSource: Fertecon
Global DAP/MAP/TSP Demand and TradeGlobal DAP/MAP/TSP Demand and Trade
US Phosphate Fertilizer Consumption ForecastUS Phosphate Fertilizer Consumption Forecast
4.638mmt-3.9%
4.825mmt
Due to higher grain prices, an increase in corn acres and need to replace soil
nutrients
Source: British Sulphur, Fertecon, PotashCorpSource: British Sulphur, Fertecon, PotashCorp
0
2
4
6
8
10
12
2006E 2007F 2008F 2009F 2010F
China S.Arabia Morocco Bangladesh India Other Demand
Million Tonnes ProductMillion Tonnes Product
New DAP Capacity* vs Demand**New DAP Capacity* vs Demand**
*Several projects uncertain, unlikely projects excluded*Several projects uncertain, unlikely projects excluded**Adjustments made to net out North American capacity curtailmen**Adjustments made to net out North American capacity curtailmentsts
Cumulative Growth Cumulative Growth –– Net CapacityNet Capacity