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December 10, 2013
Q4 2013 Market Analysis Report
This report 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 10-K for the fiscal year ended December 31, 2012 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 report and the company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Forward-looking Statements
• Agricultural Overview: Slides 4-11
• Fertilizer Market Overview: Slides 12-24
• China Fertilizer Overview: Slides 25-40
Report Summary
Agriculture Overview
0
50
100
150
200
250
300
350
400
450 Crop Price Index* Fertilizer Price Index**
Price Index (2005 Average = 100)
Crop and Fertilizer Price IndexSignificant Economic Incentive for Increased Fertilizer Usage
Source: Bloomberg, PotashCorp
* Based on corn, soybean and wheat prices (weighted by global consumption).
** Based on urea, DAP and KCl prices (weighted by global consumption).
Source: USDA, Statistics Canada, AAFC, PotashCorp
Billion CDN$
03 04 05 06 07 08 09 10 11 12 13F0
2
4
6
8
10
12
14
16Net Cash Farm Income 10-Yr Avg
Billion US$
Large Crops and Supportive Prices Result in Healthy Farm Economy
US and Canadian Farm Income
US Farm Income Canadian Farm Income
03 04 05 06 07 08 09 10 11 12 13F0
20
40
60
80
100
120
140
160Net Cash Farm Income 10-Yr Avg
03 04 05 06 07 08 09 10 11 12 13E0
10
20
30
40
50
60
70
80
90
100 Wheat Canola Corn Barley Pulses* Soybeans
Source: Statistics Canada
Million tonnes
Record Production Due to Favourable Growing Conditions
Canadian Crop Production
*Includes lentils and peas.
2013F refers to the 2013/14 crop year.
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F0
2
4
6
8
10
12
14
16
0
5
10
15
20
25Use Production Stocks-to-Use
Billion Bushels
Large Production Supports Improved Demand Prospects
US Corn Supply/Demand
Stocks-to-Use − Percent
Source: USDA
EPA Lowers Mandate but Positive Margins Could Support Additional Production
US Ethanol Profile
Producer and Blender Margins – Cents/Gallon US Corn Ethanol Use (Billion Gallons)
10 11 12 13F 14F0
3
6
9
12
15Consumption Exports
Jan-
10
May
-10
Sep-1
0
Jan-
11
May
-11
Sep-1
1
Jan-
12
May
-12
Sep-1
2
Jan-
13
May
-13
Sep-1
3
-40
-20
0
20
40
60
80
100
Iowa Plant MarginChicago Blender Margin
Source: EIA, PIRA, ProExporter, PotashCorp
0 4 8 12 16 20 24 28 32 36 40 44 48 520
5
10
15
20
25
30
35
40
45
2013 2012Prev. 5-yr Avg.
Million Tonnes, Cumulative
Strong Recovery in Offshore Demand for US Corn and Soybeans
US Weekly Corn and Soybean Export Commitments
Source: USDA
Shipping Weeks, September 1 to August 31
0 4 8 12 16 20 24 28 32 36 40 44 48 520
5
10
15
20
25
30
35
40
45
2013 2012Prev. 5-yr Avg.
Corn Export Commitments Soybean Export CommitmentsMillion Tonnes, Cumulative
Shipping Weeks, September 1 to August 31
Million tonnes
03 04 05 06 07 08 09 10 11 12 13F0
20
40
60
80
100
120
0%
10%
20%
30%
40%
50%
60%Production Global Trade Share
Million tonnes
Soybean Production Expected to Rise; Corn Output to Decline
South America Crop Production
Soybean Production Corn Production
03 04 05 06 07 08 09 10 11 12 13F0
20
40
60
80
100
120
140
160
46%
48%
50%
52%
54%
56%
58%
60%Production Global Trade Share
Source: USDA, PotashCorp
Percent SharePercent Share
Fertilizer Market Overview
Million Tonnes KCl
North America Is a Major Producing Region
World Potash Production
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E0
10
20
30
40
50
60
0%
5%
10%
15%
20%
25%
30%
35%
40%
North America FSU Middle East
Europe Others North America % of Production
Source: CRU, Fertecon, PotashCorp
Percentage
Source: Fertecon, CRU, Industry Publications, PotashCorp
Million Tonnes KCl
World Potash DemandGrowth Anticipated in 2014
* Forecast per PotashCorp
Thousand Tonnes KCl
Jan
Mar
May
Jul
Sep
Nov
0.0
0.2
0.4
0.6
0.8
1.0
1.22013 Previous 5-Yr Avg
Million Tonnes KCl
Demand Has Strengthened in the Fourth Quarter
North America Potash Shipments
Domestic Producer Shipments Offshore Imports
Jan MarMay Jul
Sep Nov0
20
40
60
80
100
120
1402013 Previous 5-Yr Avg
Source: IPNI, TFI, Blue Johnson, PotashCorp
November/December shipments based on PotashCorp estimates. November/December imports based on Blue Johnson and PotashCorp estimates.
Source: Iowa State University
lb K20 per Acrelb K20 per Acre
Revised Recommendations Support Need for Higher Application Rates
Iowa State Potash Recommendation Changes
Corn Recommendation Soybean Recommendation
80 100
120
140
160
180
200
0
20
40
60
80
100
120
140Old RecommendationNew Recommendation
Soil Test Potassium - ppm
80 100
120
140
160
180
200
0
20
40
60
80
100
120
140Old RecommendationNew Recommendation
Soil Test Potassium - ppm
Source: Various University Research Publications
Relative Yield - Percent
Significant Yield Response From Potassium Fertilizer Application in Low Testing Soils
Correlation Between Soil Potassium and Crop Yield
Soil Test Potassium - ppm
20 30 40 50 60 70 80 90 10011012013014015016017018019020021022040
50
60
70
80
90
100
110Corn-Iowa Corn-Ohio Cotton-Virginia Soybean-Illinois
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
F
2014
F0
5
10
15
20
25India Brazil Other Asia Other
Million Tonnes
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
F
2014
F0
5
10
15
20
25China Russia US Morocco Saudi ArabiaOther
Million Tonnes
Demand Recovery in India to Support Global Phosphate Trade
World DAP and MAP Trade
World DAP/MAP Exports World DAP/MAP Imports
Source: CRU, TFI, PotashCorp
09 10 11 12 13F 14F0
1
2
3
4
5
India Europe Pakistan Latin America
Indonesia Others
Source: CRU, TFI, PotashCorp
Million Tonnes – P205
US Phosphoric Acid Exports Have Remained Strong
World and US Phosphoric Acid Trade
US Phosphoric Acid ExportsImports by Major Importer
Jan
Feb Mar Apr
May Ju
n Jul
Aug Sep OctNov Dec
0.0
0.1
0.2
0.3
0.4
0.5
0.6
2013 Previous 5-Yr Avg
Million Short Tons – P205
Million Short Tons
Inventory
Million Short Tons, Cumulative
Exports
Million Short Tons, Cumulative
Domestic Sales
Lower Exports Sales Have Resulted in Elevated Inventory
US DAP/MAP Use and Inventory Exports
Jan
Mar
May Ju
lSep Nov
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.42013
Source: TFI
Jan
Mar
May Ju
lSep Nov
0
1
2
3
4
5
6
7 2013 Previous 5-Yr Avg
Jan
Mar
May Ju
lSep Nov
0
1
2
3
4
5
6
72013
2009 2010 2011 2012 2013F160
170
180
190
200
210
220
230
240Projected Capacity 1-Year Prior Actual Capacity
Capacity - Million Tonnes
Ammonia Capacity Projections vs. Actual AdditionsGlobal Ammonia Projects Have Faced Delays
Source: Fertecon, PotashCorp
Source: Fertecon, PotashCorp
2014 global trade is expected to reach 19.6 million tonnes.
Million TonnesMillion Tonnes
Ammonia Trade Is Expected to Increase in 2014
Global Ammonia Trade
World Ammonia Imports World Ammonia Exports
17,500.0
18,000.0
18,500.0
19,000.0
19,500.0
20,000.0
17,500.0
18,000.0
18,500.0
19,000.0
19,500.0
20,000.0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
11,000,0002013/2014 2012/2013 Previous 5-Yr Avg
Source: USDOC, PotashCorp
Note: Nitrogen imports include ammonia, urea, and UAN.
Million Short Tons (N basis)
Potential for a Robust Spring
US Cumulative Nitrogen Imports
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-130
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Thousand Tonnes
Impact of China’s Export Tax on Urea Trade Volumes
China Urea Exports by Month
Blue denotes high export tax months; Green denotes low-tax window
Source: NDRC of China, CRU, PotashCorp
China Fertilizer Overview
Source: IFA, China Agriculture Yearbook, PotashCorp
China’s Potash ConsumptionMajority of Consumption in South and Central Provinces
China’s Potash Consumption by Province
40%
21%
10%
6%4%
19%All Other Crops
Sugar Crops
Wheat
Corn
Rice
Fruits & Vegetables
Potash Use by Crop
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
300
600
900
1,200
1,500
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0Fruits & Vegetables Cereals Other CropsPotash Consumption
Potash Consumption – Million Tonnes K20Crop Production – Million Tonnes
China Crop Production and Potash ConsumptionStrong Relationship Between Crop Production and Potash Consumption
Source: FAO, Fertecon
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013F
2014F
0
1
2
3
4
5
6
7
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40Potash Consumption Corn/MOP Price Ratio
China Potash Consumption and Affordability Index
Million Tonnes K2O Affordability Index
Rebound in Potash Consumption With Favorable Crop-to-Potash Price Ratios
Source: China Grain Consultant, Fertecon, PotashCorp
Land Consolidation Creates Opportunity to Improve Farm Management Practices
China Corn Fertilization Rates and Land Consolidation
Potash Application Rate on Corn Farmland Rented
Source: IFA, USDA, Fertecon, Ministry of Agriculture, BOABC
Pounds/acre - K2O
US Canada Brazil China0
10
20
30
40
50
60
Percentage
2004 2005 2006 2007 2008 2009 2010 2011 20120
5
10
15
20
25
China’s Domestic Potash ProductionDomestic Production Has Increased
Million Tonnes Product
Potash Capacity by Major Producers (2013E)Potash Production by Product
2007 2008 2009 2010 2011 2012 2013E0
1
2
3
4
5
6
7MOP Primary SOP
MOP Capacity Million Tonnes
QSLI 2.9
Zangge 1.2
Citic Guoan 0.4
Others 0.3
Total 4.8
Primary SOP Capacity Million Tonnes
Luobupo 1.3
Others 0.1
Total 1.4
Source: CRU, Fertecon, PotashCorp
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F0
2
4
6
8
10
Seaborne Imports Cross-border Imports
Million Tonnes KCl
Seaborne Imports Account for Greatest Share of Chinese Imports
China’s Potash Imports
Source: CRU, PotashCorp
Source: CRU
Rock and Granulation Facilities Not Always Locate Together
China’s Rock and Granulation Capacity Location
Sichuan (9% of Rock Production)
Guizhau (23% of Rock Production)
Yunnan (33% of Rock Production)
Hubei (35% of Rock Production)
- Location of DAP Plants
Note: Higher cost integrated producers typically have higher rock transportation costs.
Integrated (low) Integrated (high) Non-integrated0
100
200
300
400
500 Total cash cost Freight and export tax costs
US$/Tonne
Emerged as a Major Supplier but Some Producers Are Higher-Cost
China DAP Export Cost Profile
Source: CRU, PotashCorp
03 04 05 06 07 08 09 10 11 12 13F 14F 15F 16F 17F0
5
10
15
20
25
0%
20%
40%
60%
80%
100%Production Capacity Operating Rate
Operating Rate - PercentProduct - Million Tonnes P2O5
Near-Term Oversupply in Chinese Market but Moderating Going Forward
China’s Phosphoric Acid Supply and Demand
Source: CRU, PotashCorp
06 07 08 09 10 11 12 13F 14F 15F 16F 17F0
1
2
3
4
5
6
Million Tonnes
60%
11%
5%4%
4%
16%
Major Supplier but Likely to be Challenged by Low-Cost Exporters
China Phosphate Profile
2012 DAP/MAP Exports by Destination DAP/MAP Export Forecast
India
Vietnam
Pakistan
LatinAmerica
Other
Oceania
2012 Exports – 4.8 million tonnes
Source: CRU, PotashCorp
Million Tonnes
Ammonia Consumption for Industrial Use Expected to Increase
China Ammonia Consumption
2005 2006 2007 2008 2009 2010 2011 2012 2013F
2014F
2015F
2016F
2017F
0
10
20
30
40
50
60
70Urea Other N fertilizer Industrial
Source: CRU, Fertecon, PotashCorp
Coal Is the Primary Feedstock for Nitrogen Production in China
Major Areas of Raw Material Production
Xinjiang AR
Tibet AR
Qinghai
Gansu
Sichuan
Yunnan
GuizhouHunan
Guangxi AR
Hainan
NingxiaAR
Guangdong
Jiangxi
Fujian
Chongqing
HubeiAnhui
Zhejiang
Jiangsu
Inner Mongolia AR
Heilongjiang
Jilin
Liaoning
Shaanxi
Shanxi
Henan
Hebei
Shandong
Hong Kong SARMacau SAR
Tianjin
Shanghai
Beijing
Ammonia
Phosphate rock
Potash
Major Areas of Fertilizer Production Major Areas of Coal Production and Urea Exports
Main Anthracite-Producing Provinces
Main Urea-Exporting Provinces
Source: Fertecon, CRU, PotashCorp
2001 2003 2005 2007 2009 2011 2013F 2015F 2017F0
20
40
60
80
100
0%
20%
40%
60%
80%
100%
Natural gas Thermal Coal Anthracite (L) Anthracite (M) Anthracite (S) OthersCapacity Operating Rate
Operating Rate - PercentProduction - Million Tonnes
China Urea Supply and DemandLocal-Level Interest in Building Additional Capacity Remains Strong
L refers to large-scale producers, M refers to medium and S refers to small.
Source: CRU, PotashCorp
Natural Gas Thermal Coal (L)
Anthracite (L)
Anthracite (M)
Anthracite (S)
200
240
280
320
360Total cash cost Freight and export tax costs
L refers to large-scale producers, M refers to medium and S refers to small.
Approximately 80-90 percent of urea exports from China are from coal-based plants.
US$/Tonne
Chinese Urea Export Costs
China Urea Feedstock Capacity Share
Natural Gas 28%
Thermal Coal 6%
Anthracite (L) 29%
Anthracite (M) 24%
Anthracite (S) 9%
Others 4%
Total 100%
Wide Range of Costs Depending on Feedstock
Source: Fertecon, CRU, PotashCorp
Million Tonnes Urea
China Has Been a Wild Card In the Urea Export Market
Chinese Urea Exports
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F0
1
2
3
4
5
6
7
8
9
Source: CRU, Fertecon, PotashCorp
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