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Executives

Denita C. Stann – Vice President, Investor and Public Relations

William J. Doyle – President and Chief Executive Officer

Wayne R. Brownlee – Executive Vice President and Chief Financial Officer

G. David Delaney – Executive Vice President and Chief Operating Officer

Stephen F. Dowdle – President, PCS Sales

Analysts

Ben Isaacson – Scotia Capital Markets

Christopher S. Parkinson – Credit Suisse Securities

Jacob Bout – CIBC World Markets

Jeffrey Zekauskas – JPMorgan Securities LLC

P.J. Juvekar – Citigroup Global Markets Inc.

Joel D. Jackson – BMO Capital Markets

Michael Leith Piken – Cleveland Research Co.

Adam Samuelson – Goldman Sachs

Mark Connelly – CLSA

Vincent Andrews – Morgan Stanley & Co. LLC

Don D. Carson – Susquehanna Financial Group LLP

David I. Begleiter – Deutsche Bank Securities, Inc.

Kevin McCarthy – Bank of America Merrill Lynch

Yonah Weisz – HSBC Bank Plc

Potash Corporation of Saskatchewan Inc. (POT) Q1 2013 Earnings Call April 25, 2013 1:00 PM ET

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Potash Corp. First Quarter Conference Call. At this time, all call-in participants are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session. (Operator Instructions)

Once again webcast participants are encouraged to submit a question to management online from your audio player pop-up window. You can simply type in your questions and send it. These instructions will be repeated prior to the question-and-answer session. (Operator Instructions) I would like to remind everyone that this conference call is being recorded on Thursday, April 25, at 1 pm Eastern.

At this time, I’ll turn the conference over to Denita Stann, Vice President, Investor Relations and Public Relations. Please go ahead.

Denita C. Stann

Thank you, Brock. Good afternoon everyone and thank you for joining us. Welcome to our first quarter earnings call. In the room with us today, we have Bill Doyle, our President and CEO; Wayne Brownlee, our Executive Vice President and Chief Financial Officer; David Delaney, Executive Vice President and Chief Operating Officer; Mike Hogan, President of PCS Potash; Brent Heimann, President of PCS Phosphate and PCS Nitrogen; and Stephen Dowdle, President of PCS Sales.

I’d like to welcome the media who are listening in and remind people that we are live on our website. I would also remind everyone that today’s call may include forward-looking statements. These statements are given as of the date of the call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of these statements, and actual results could differ materially.

For additional, information with respect to forward-looking statements, factors, and assumptions, we direct you to our news release and our most recent Form 10-K. Also today’s news release which is posted on our website includes a reconciliation of certain non-IFRS financial measures to the most directly comparable IFRS measures.

I'll now turn the call over to Bill Doyle for some comments, and then we'll go to questions.

William J. Doyle

All right, thank you very much Denita, and good afternoon everyone and thank you for joining our discussion of PotashCorp's first quarter performance. We appreciate this opportunity to share our thoughts on the current market and our expectations for the months ahead.

As we anticipated 2013 is shaping up to be a strong year for fertilizer demand as a need to improve soil fertility and economic opportunity for farmers converge. Those factors are favorable for our business especially in potash. The impact was evident in our first quarter earnings of $0.63 per share which approached the upper end of our guidance and represented a 13% increase over the same period last year.

The renewal of potash demand early in the year was the key driver of our improved performance as buyers and all major markets began securing supply in advance of key planting seasons. Our offshore potash volumes increased nearly 70% from the first quarter of 2012, with the resumption of shipments to China and accelerating demand in a number of key spot market.

Brazil was especially active highlighted by an all-time one-month record for Canpotex shipments in March and also our first-quarter sales volume record for our New Brunswick facility. The same agronomic drivers that motivated offshore buyers led North American sales volumes to nearly double last year's first quarter as dealers began positioning product to meet significant demand at the farm level.

Our nitrogen business was strong as well contributing record first-quarter gross margin on higher prices and volume. While we generated good results in phosphate, the weaker pricing environment resulted in a lower contribution compared to last year's first quarter. In total, we have reported the second-highest gross margin for any first-quarter in the history of the company. This provided a solid foundation to begin the year and we see encouraging signs that we can build on this momentum.

With the market conditions in place today, farmers have considerable incentive to optimize yields and we are seeing that translate into stronger fertilizer demand. Yet early projections for a big North American crop are putting some downward pressure on grain prices and correspondingly some people's assumptions for future fertilizer needs.

That thinking ignores two important realities of global food production. First North America is only one piece of the puzzle, we need a record global harvest, just to close the gap left by poor grain production last year. Second we all know that crop production has inherent uncertainty and that an early forecast of a record harvest doesn't always end with a record crop in the bin. Just look at last year.

Even if a large harvest is achieved, the prospect of lower crop prices doesn't change the underlying need for soil fertility. Crop production is not a one-time event and the need to replenish nutrients in the soil is ongoing. In fact a good harvest draws more nutrients from the soil which creates an even greater need for our products. Farmers recognize this and know their profit equations does not begin or end with a single growing season, nor is it reliant on crop prices alone. Proper soil fertility will always be an important fact to increasing yields and the economic success of any farm in growing seasons to come.

While we advocate this long-term approach to crop nutrition, we also see significant opportunity in the near-term. Our people talked to fertilizer buyers around the world and there is a palpable sense of optimism about the current crop season and the economic potential in agriculture. We believe 2013 will be a recovery year for potash demand and maintain our estimate of global shipments and underlying consumption in the range of 55 million tonnes to 57 million tonnes.

In North America, fertilizer dealers have looked beyond the delayed start to the spring season. In areas where planning has begun fertilizer applications are reportedly strong. And in regions where planning is delayed, we expect a very active next few weeks as the season begins to hit full stride. Even with the increase of first-quarter volumes, we hear from our customers that they anticipate significant needs through the second quarter and the balance of the year and we are well positioned to respond.

I recently returned from a trip to Latin America and found an optimism surrounding agriculture. Shipments to this market have been very strong and securing potash is front of mind as growers there understand the link between soil nutrition and yields. We believe this will translate into another year of strong demand and our confidence is supported by first quarter shipments and a good order book for the second quarter.

While Latin America remains an extremely competitive environment, we have good customer engagement and the ability to serve our customer needs through Canpotex and our New Brunswick facility.

In China, the early settlements of potash contracts resulted in increased first quarter volumes and provided a steady base load of tonnes to be shipped through the end of June. Even as Canpotex fulfills its remaining volume commitments through the second quarter, early discussions with Sinofert indicate supply needs through the second half of 2013. This is consistent with the Chinese government’s added focus on improving crop productivity. Potash will play a vital role in this endeavor, which we believe will drive demand growth from China not only this year, but well into the future.

With fertilizer subsidies creating an impediment to adequate imbalanced soil nutrition, India is the one key market where the economic opportunity and realities of soil science have not translated into improved demand. Despite this challenge and the risk that it poses to sustain crop productivity, new potash contracts signed during the first quarter are expected to provide a steady volume commitment through the balance of 2013, which is a step forward from 2012. We believe shipments to India will approximate 4 million tonnes, outpacing last year’s total.

Other Asian countries outside of China and India were slower to engage early in the year, but shipments accelerated towards the close of the quarter. This market has become a consistent leader in potash demand growth and we anticipate a greater push for new supply in the quarters ahead.

The estimated recovery in global potash demand for 2013 plays well to our strengths. Consistent with our January guidance, we anticipate sales volumes in the range of 8.5 million to 9.2 million tonnes, far surpassing our 2012 total despite a slightly lower Canpotex allocation.

Our ability to grow volumes is often overlooked and even with potash prices resetting at lower levels in recent months, we expect improved gross margin contributions from our potash business in 2013. Importantly, we will have capacity to meet the world’s growing potash needs and we anticipate our percentage of Canpotex sales will increase as we complete our Saskatchewan potash projects.

We have also increased our capability in nitrogen, with additional ammonia production available at Geismar and Augusta and an expectation of reduced natural gas curtailments in Trinidad. Our sales volumes should increase from 2012 levels. A decline in prices for nitrogen-based products, especially urea, is expected to result in lower margins than previously estimated, but we still anticipate record gross margin for our nitrogen business in 2013.

Phosphate fertilizers continue to face uncertainty around the timing and extent of India’s return to the market. Our diversified product mix helps offset this weakness as our margins in industrial and feed products continue to be more stable than those in fertilizers. Given these conditions, we forecast second quarter net income per share to be in the range of $0.70 to $0.85 and maintain our full-year guidance at $2.75 to $3.25 per share.

It is hard to deny that potash stocks took a backseat over the past year with some investors maintaining a bearish outlook for this key nutrient. Recent months have been a reminder about the realities of the potash business. Over the past few years, we have seen people projecting a multitude of Greenfield projects coming down the potash supply pipeline and some consultants have suggested that there could be more than 10 million tons of capacity from these new mines by 2017.

Facts are important here. To-date only three projects have been approved and all are in very early phases of development. The Greenfield mine in Argentina is now reported to be shelved due to unfavorable economics. The Solution mine project in Saskatchewan recently raised CapEx estimates by about 25% and extended its timeline, and a project in Russia has had many reports of significant and ongoing challenges in shaft sinking and development. Time will tell whether any of these projects make it to the finish line with an acceptable return.

We have said many times that people are overestimating future capacity because the reality is that building Potash capacity whether Greenfield or Brownfield is difficult work. More importantly the economics on Greenfields just aren’t there. We don’t have a crystal ball, but we know that every passing day suggest it is prudent to dig a little deeper to get a true picture of the landscape for production in the years ahead.

[End]

When we step back and look at what we can offer investors we believe it is a compelling story. If our estimate of rising demand for potash in the coming years is accurate no one is better positioned than potash where. We have over 40% of the new operational capability scheduled to come online over the next four years. Our volume growth story is unmatched in the industry. Even if we are early with some of capacity, we will have avoided the high construction costs now facing others in the industry. And as we have demonstrated throughout our history, we know how to drive profitability even when there are bumps along the road. Beyond this potential, our ability to generate free cash flow will be magnified as our spending on these capital expansion is nearing completion. And we have a history of using it to create strong returns for our shareholders.

One of our options was to explore increased ownership position in ICL. And there has been no shortage of speculation and media coverage on this front. While we believe a potential transaction holds much for our stakeholders and the stakeholders of ICL, we believe now is not the right time to move forward. As we have throughout our history, we remain focused on options that build the greatest long-term value for our shareholders and look to build on our track record of success.

Thank you for your interest in Potash Corporation. I am joined by our very seasoned and skilled senior management team and we would be happy to answer your questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen we will now conduct the question-and-answer session. (Operator Instructions) The first question today comes from Ben Isaacson of Scotia Bank. Please go ahead, sir.

Ben Isaacson – Scotia Capital Markets

Thank you very much. This question is for Wayne. Wayne, at a conference in September, you stated that if you believe that you could not eventually gain control of ICL, you would look to exit that stake in due course. Given your announcement today, can you provide some color or perhaps an update or put that statement in context?

And then just the second part of that question is, can you also explain what the triggers were to arrive at this decision to stop proceeding with an IPO acquisition? Thank you.

Wayne R. Brownlee

Ben, I think it’s – I would reiterate that if we get to the point in time where we believe that there is not a transaction that’s possible in the long-term best interest of the company then we would exit the stock. That remains to be the case. I think that our comments in the press release basically already speak to the rationale as to why we have exited the stock and I don’t think that there is any basis to elaborate any further on it.

William J. Doyle

Ben, what I would say just maybe to give you a little more color, because I am sure everyone is interested in this. First of all, there was no transaction. So all the speculation about a transaction, people being opposed to a transaction I found very interesting when there wasn’t a transaction. Normally, you wait till there is a transaction, have a little more thoughtful review of the process before you’d make your opinion known.

Secondly, I would say that we did have discussions with the Government of Israel, the report of my meeting with Prime Minister Netanyahu was correct, they’ve got it wrong by about a month and half, but the meeting was held and I would tell you that I have respect for Prime Minister Netanyahu and his understanding of the importance of foreign investment.

Any country including Canada needs foreign investment to be able to grow, to be able to have more jobs, to create a bigger pie where wealth is generated for more people, and I would say from the very start Prime Minister Netanyahu understood this and we were gratified by his thoughts on foreign investment and particularly his openness to looking at this transaction or potential transaction.

So, that really is about all that we’ll say about this, the rest is very hypothetical and we think this is a terrific company as I’ve said we have long-term strategies. We’re patient in the execution of our strategy, and we think our near 14% shareholding in ICL, is a tremendous investment for our company, and we look forward to the future opportunities that might become available there.

Operator

The next question comes from Christopher Parkinson of Credit Suisse. Please go ahead.

Christopher S. Parkinson – Credit Suisse Securities

Good morning, thank you. Can you give us a little more color on your capital allocation program given your comments today on walking away from the ICL, and then also in particular, just kind of how you’re weighing any subsequent growth strategies versus return to shareholders, thank you.

William J. Doyle

Well, I mean we are clearly a company that’s going to have more free cash flow as we go forward, and we always look at the best use of that cash, and we have a Board meeting coming up in a couple of weeks, and I guarantee you that we will sit with our Board and review opportunities as we always do.

Operator

The next question comes from Jacob Bout of CIBC. Please go ahead.

Jacob Bout – CIBC World Markets

Maybe just turning to the nitrogen side, some fairly strong results, maybe thoughts on the Trinidadian gas supply, supply curtailments, what’s your thoughts are in 2013, 2014, and then maybe comment a bit on the divergence that we’ve seen in ammonia and urea pricing and how long do you expect that to persist.

William J. Doyle

I’m going to ask David to take the first part of that question, I’m going to ask Stephen Dowdle to answer the second part, so David?

G. David Delaney

Yes, Jacob this year the gas curtailments are less year-to-date, we have lost about 25,000 tons for the year. We are anticipating around 100,000 tons and that’s about half of what we lost in 2012. I will add to that the Energy Minister of Trinidad this past month was talking about the improvements in the upstream sector in terms of increased drilling, the end of the maintenance program this year with BP and BG really encouraging signs in the upstream, rig activity is the highest since ’09. The rig count is up over 212 rigs, so we’re very encouraged by what we’re seeing from the upstream sector in Trinidad.

William J. Doyle

All right and Stephen.

Stephen F. Dowdle

Yes, Jacob, on the divergence in ammonia and urea pricing, on the ammonia market we’ve seen a little different dynamic there with some curtailments in some of the producing regions and also some delays and some new capacity coming on.

So there’s been a bit of tightness in the face of strong industrial demand, which has really helped keep ammonia prices relatively firm. And we’re seeing them to come off here most recently, but relatively speaking they have been firmer than urea pricing, which has, urea prices have been pressured by the delay in the planting in the Northern hemisphere. And we have seen significantly more imports come into North America in anticipation of a large corn acreage being planted and now that planting is bit delayed we’ve seen a little pressure on the market. So we’re seeing some price weakness there as people have sought to liquidate some of their holdings.

Operator

The next question comes from Jeff Zekauskas of JPMorgan. Please go ahead.

Jeffrey Zekauskas – JPMorgan Securities LLC

Thanks very much. In your press release you talked about the transaction with ICL or a potential transaction with ICL being of tremendous benefit to Potash stakeholders. Why is that? Why would such a transaction be a tremendous benefit to Potash shareholders?

William J. Doyle

Well, again, Jeff, I think I answered the question without getting into too much detail. But when you have a real good look at this business, you understand the importance of low-cost delivered supply that should give you a good indication why we think it’s advantageous for our stakeholders over the long-term.

Operator

The next question comes from P.J. Juvekar of Citi. Please go ahead.

P.J. Juvekar – Citigroup Global Markets Inc.

Yes. Hi, good afternoon. You’re talking about sort of mid-50s million tonne type potash demand, somewhere around 55 million tonne to 57 million tonne, and if I look at some industry presentations from five years ago, potash demand was expected to reach about 62 million tonnes to 63 million tonnes by 2013. And so, if I take a step back and look at it, maybe India could take couple of million more tonnes from what it is buying this year. But where else would you need demand to pick up to reach that goal, is it in Europe or is it in China?

William J. Doyle

Well P.J., I think when you look at the last five years, as you know, we had a great recession. We had very, very slow to negative global growth in some of the major areas. United States, a big driver, Europe, a big driver of demand, lower growth in places like India, lower growth in China. What you’ll see is we returned to global growth, and we’re seeing some better signs this year in 2013. We’re seeing, despite the fact that lot of people are so negative on grains and obviously the commodity space in general, we’re seeing some improvement in global growth including United States. And we think that you are going to see stronger global growth coming out in 2014 as well.

As we get to return to global growth, you will see this growth in potash demand. It has been stunted by the great recession, one of the worst recessions that we’ve seen in, certainly in our lifetimes and I think that clearly India needs far more potash. India is stunting its ability in agriculture and there will be a catch up in India, you’re going to see as they get some semblance of market economy there and get the government out of the way you will see a tremendous catch-up in India. There is huge growth ahead in China.

If you look at Southeast Asia, Malaysia, Indonesia tremendous growth prospects there. If you look at other markets in south-east Asia in places like Myanmar which have just opened up, tremendous growth; Bangladesh, tremendous growth; if you look at Central America, South America, Brazil is really the only one that’s keeping pace with the growth in that area of the world and Brazil has a lot more growth ahead of it.

It isn't a question of where there isn't growth, it’s the question of where there is growth and you go round the world country-by-country, there is an overwhelming need for potassium to keep pace with the global growth in demand for food.

Operator

The next question comes from Joel Jackson of BMO Capital Markets. Please go ahead.

Joel D. Jackson – BMO Capital Markets

Thanks. If we look at some of your earnings estimates ranges here, it would seem to suggest that you need average potash in Q2 historically to reach your guidance range, middle of you guidance range and pretty strong volumes the last three quarters of the year. So Q2 to Q4 to make your full year guidance, surely not peak but pretty above average, so maybe you could just comment on that and talk about your relative confidence in hitting the midpoint of your Q2 guidance versus your full year guidance. Thanks.

William J. Doyle

All right, Joel I am going to ask Stephen Dowdle to comment on that.

Stephen F. Dowdle

Yes, Joel as we look out into Q2 then into the second half and Q2 we look in the domestic market and we’re expecting good demand, good potash demand in North America. Certainly we’re going to plant lot of acres, where we’ve seen the season already begin in the mid-South and the South East there has been tremendous demand for nutrients, tremendous demand for potash, we’ve seen warehouses empty out quite quickly, and it need to be refilled. So, I think that bodes well for the bulk of the [corn] once we get into the fields and start planting.

So, we’re confidence that in Q2 we’re going to see good demand on the offshore market, it’s pretty well packed for the first half with the contracts that have been signed with China and India. Brazil is off to a trip that starts in the first quarter and we think that momentum will continue. And as we go into the second half and anticipate what might be on the offshore market, if we look at China for example. We believe that we are in recovery year, this year and we see consumption, potash demand consumption is going to recover in 2013 and be around that $11.5 million ton level in China.

So there is certainly the need for continued import volume to come into China, and we think of that will occur. The bulk of the India contracts will be shift during the second half. So, India will have the presence in the market that are hasn’t had during the first half. And we think there will be in the heat of the Brazil demand season in the second half. And we believe that we should see good fall demand in the domestic market as we exit the planning season and certainly the need for nutrients is there. We’ve been drawing down on the soil bank over the last few years and there is a growing awareness in North America of the need to keep up with the crop nutrient removal and pay attention to our soil fertility.

So we think that the second half, we’re going to see the momentum continue from the first half into the second half.

Operator

The next question is from Michael Piken of Cleveland Research. Please go ahead.

Michael Leith Piken – Cleveland Research Co.

Good morning. I was hoping you guys could give us an update on the proving run at the Cory mine and what your expectations would be for your Canpotex allocation if that gets completed.

William J. Doyle

All right, Michael, well we’re underway. And if you take it day by day and you see how it goes and of course you hope things like ore grade and mining conditions are there’s a good continuity from day to day and so we’ll see how that moves along. We’ve got May and June ahead of us here, so we’re just at the beginning of this, but we think we’re going to have a successful run and our allocation at Canpotex will move up a few percentage points and we’ll be back close to where we were prior to (inaudible).

Operator

The next question comes from Adam Samuelson of Goldman Sachs. Please go head.

Adam Samuelson – Goldman Sachs

Yes. Thanks. Good afternoon. Just a question on China and maybe first on the confidence that you look to in the press release on a timely resolution of second half contract, may be you elaborate that a little bit and particularly when you had delays in North America but also in China with some extremely cold weather in the north and central parts of the country and drought in the South. May be some thoughts there and how that’s impacting the domestic markets and domestic pricing in China has been a little bit softer and how that will impact import demand in the second half of the year. Thank you.

William J. Doyle

Well, let me tell you that, China doesn’t plan quite as fast as we can in North America. But to go out they can throw at it, and so they are too far behind in terms of being able to move quickly, a lot of all people are just what we me about the day and we sit here on April 25, of course they look at the last two year’s. Last year, we had such early start really throughout the Northern Hemisphere and this year of course it’s, I would say more normal year, and we think that May is obviously a big month traditionally in the planting process around the Northern Hemisphere I think you’ll see that both in China and the U.S. and Canada and Europe as well.

So I’m not too concerned about where we are right in the moment is you said in our remarks where we have seen improvement, we’ve seen very good application rates in the people understand profitability of growing crops today. So, they are not going to pass on the opportunity in terms the timely resolution of the China contract for the second half, first about the needs there. So, that’s first and foremost.

And secondly, Sinofert knows that it needs to perform, we pass the times where you can have delay in performance and so they know that’s very clear and so. That’s an other reason why we’re confident that they will have an early conclusion. We had discussions with them already in every indication is that will have in early conclusion in the second half.

Operator

The next question comes from Mark Connelly of the CLSA. Please go ahead.

Mark Connelly – CLSA

Hi, Bill. So thinking about your comments that buyers are going to limit their potash as we move forward. In the comments, we just heard about your expectations for demand in the second half. I can, but think that the reason buyers want to exist the season is because producers insist on carrying, so much inventory all the time. So, can you help us think about why industry inventories are so high in potash and don’t seem to be coming down. Is the industry just exceptionally bullish about demand or is there some view that carrying inventories somehow good thing?

William J. Doyle

No Mark, I think the model has changed, when we had this recession great recession the risk conversion to inventory at the retail level has become complex. And so every retailer wants to go out empty. So, whose is going to carry inventory with, the inventory used to be in the retail system is no longer there. And so that’s why you had an expansion of the inventory at the producer level. And everybody gets excited about that, but they don’t really understand that the game has changed.

And we don’t really worry about that because we have the capability to store the inventory. But we’ve seen pronounced change in the way people look at inventory at the retail levels. So if they don’t want it keep at their plants, at their facilities, we’ll do it, and delivered to them. But it has changed that the market has changed. I read that concern about the inventory levels, but I just, I’m amazed that people in the allies community don’t realize that the market has changed and it’s changed over the last five years, but currently that’s news to some people, but it really isn’t news to us and that’s why you’ve seen increases in inventories at the producer level, because the retailers aren’t keeping the historical inventories that they use to keep.

Operator

The next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.

Vincent Andrews – Morgan Stanley & Co. LLC

Thanks. And Bill maybe I will follow-on your comments that the game has changed and ask you, if we look at this quarter, what we see is, volume is higher, but price is lowering and gross profit grew year-over-year and given you have the Brownfield capacity that you could turn on, has your view served the price volume relationship involved at all as the game has changed?

William J. Doyle

No, not really. We always think that price is more important than volume, you can’t, you have no volume, but I think what happened here is, you saw and I know that some people got concerned about where the price is reset. In fact it was a horrible change and again for an (inaudible) industry, how could this happen. Well, the fact of the matter is that if you look at the marketplace, of course we had a very dramatic reduction in 2009 and we dug our way out of the whole 2010, 2011 and then 2012 was another, because we are not at this great recession yet with another pause.

And so I think the levels that we settled at when the price reset were, I think those were actually were at very good levels to reset. We certainly didn’t destroy any history of the market, in overall matter of just 20 years or so. I know that's a long time for some of you, well not so long-term for old goats like me, but you realize that historically these prices at where they are today are not bad and you see the results even last year's, let’s say whole goes everyone thought it was, we had revenue of just under $8 billion and net income of $2 billion and I know that's terrible and I'm in the wrong, some said that I'm missing because I just think that if you look at this of course price is more important, we'll always sacrifice volume for price but the fact that we were able to I think put a turn kit and where the price was going, reset the price.

It’s had an impact, I think on some of these projects. I mean that's fact that borrowing has pulled out of Argentina. I think the fact that you've seen this solution minded increase in capacity there and I would say that that's the first increase that you're going to see, those costs are going to keep coming up and that time line is going to be delayed and the Russian project has got a long way to go, there will be more expenses and as I said, I don't think either one of those projects are going to have a return and then you look at some of the (inaudible) projects. I mean there is just no return at all on those, so the balance of the business is not all bad and what we see for 2013 a recovery in volume, I think modest price increases because you’re seeing it come in the spot market but business is pretty solid with less production coming at us than any one in the analyst community as forecast and I think a very healthy business; two, three, four years down the road and you’ll see, I think, good returns continuing to be generated by this company through good markets and once that maybe you think that aren’t so by historic standards, are actually quite [exempt].

Operator

The next question comes from Don Carson of Susquehanna Financial. Please go ahead.

Don D. Carson – Susquehanna Financial Group LLP

Hi, Bill. Just want to continue on the price volume discussion. I mean, obviously these prices are very good from a producer perspective, but is there a level at which you think, I mean, how do you think of prices elasticity, what pricing power do you think you have before demand does erode somewhat? And then, looking specifically out, the Summerfield price, which you typically announced May, June, do you think you’ll have to cut that to induce people to hold the inventory or do you think you can just continue to sell at the current or do you have any list price?

William J. Doyle

It’s little early on Summerfield emersion in spring season. So I don’t think we’ll give you any answer on that one yet, Don. But in terms of pricing power, I mean, pricing power is related to the health of the market. We need to get the market growing. As I said, we’re seeing signs, early signs of global growth. We think that this year, obviously, is going to be about a 10% top in total shipments of potash around the world over last year. I think 2014 will be stronger. When you get that volume moving and you get some of these players that are constrained by production, they start looking at pricing differently.

So I think the fact, as I said many times, we do have pricing power when prices go down by less than what historical standards would dictate. Even though I know it disappoints some people that they go down. But the fact of matter is that the relative level of price stability in potash is not the real folks. I mean, this is completely different business and we’ll see more pricing power as this market grows, again and tightens up and in the mean time we’ll have a reasonable level of profitability.

Operator

The next question comes from David Begleiter of Deutsche Bank. Please go ahead.

David I. Begleiter – Deutsche Bank Securities, Inc.

Thank you. Bill, just more near-term in Brazil given the strength you’re seeing in demand, do you expect prices to move up in Brazil the next few months here from current levels?

William J. Doyle

I do. We’re seeing and have seen Brazil move up, and we’ve had about a $40 move so far this year and we’re seeing more price and again modest. I mean, these increases have come at about $10 a month now and I think that that’s a good thing and it also sets the stage for second half contract negotiations in other markets around the world. But this growth in the marketplace, again, that has an impact in this spot markets and that’s why we’re seeing this movement. I hope that answers the question.

Operator

The next question comes from Kevin McCarthy of Bank of America Merrill Lynch.

Kevin McCarthy – Bank of America Merrill Lynch

Yes. Good afternoon, Bill. Two questions on potash nutrient. First, in your prepared remarks, I think you referenced 25% capital cost inflation at one of your competitors, Canadian expansion. Just wondered if there is anything project specific or company specific there or whether that sort of level is indicative of broader market [EMC] trends? Number one. And then, second question, your results in your outlook for demand for potash seem to be quite good, I would say. Yet in the financial outlook section of your press release there is a certain set references additional market related downtime as likely this year and I’m just trying to reconcile that, and I would appreciate your view on why that might be necessary sitting here today.

William J. Doyle

Well, that (inaudible) pretty easy. We have 12.5 million tonnes of capacity in 2013 and we’re not going to sell that much. So obviously we’re going to have to take some shutdowns as we go. We have 111 days of shutdown, 625,000 tonnes we took off the market in the first quarter. We were the only ones to do that and that you’ll see us continue to be disciplined on the production front, balance the demand we see with the supply that we can produce. So that relates to the downtime that we are forecasting.

In terms of the solution mine here in the province that came out with a very low initial number. We knew that that was unrealistic. That was put out by one of the promoters, Potash One. They bought this legacy project from Potash One for $434 million by the way, which you got to add to the $4.1 billion that’s out there, lot of people forget about that, but when you start looking at return you should make sure you add that on there, and then just a fact that there is a lot of clarity yet we had on cost of ports and rail cars that they don’t have identified yet and then you’re looking at the pretty tight job market here in Saskatchewan.

And the timing of all these things originally it was $3.2 billion for 2015. We knew that was anarchy from the beginning and so now we’re starting to see the bloom come off the rose, and this is what I’m saying, this is hard work and these are expansion projects, and there is whole lesson that in this business, you don’t want to be the first one to build the project. Greenfield generally has not been a successful formula in the fertilizer because you want to be the second or third owner. I feel it works, you can make that work especially if you get in early and you get some fixed contracts not these cost plus contracts are not absolutely dominating the scene, so you had to be early in the game to have it work for you but, Greenfield projects, the history going over the last 40 years, we’re here the one that builds it, you want to be the guy that picks up the pieces, as I said second owner or third owner, he is the one that ends up making it, because then you get the right cost structure.

Operator

The next question comes from Matthew Korn of Barclays. Please go ahead.

Matthew James Korn – Barclays Capital

Good afternoon Bill and everyone, congratulations on the quarter, just the question for you, now that ICL is off the table. Just wondering how important do you think additional consolidation or discipline in the overall potash industry is looking ahead. I mean and maybe as increasing your stake and if you see SQM is something like that you can realistically pursue?

Unidentified Company Representative

Well, I think we said, if we saw no possibility ever in Israel, that we would get rid of the shares Wayne said that. And so I think you clarified his remarks by saying that we don’t say never. This is a political season, there is a new correlation there, there is some political play on this whole thing and your popular settlement people, different people want to be prime ministers. So, those things change too and so, I just say that we’ve been very patient as I’ve been saying and so we’ll see what happens there.

In terms of SQM or potash we have operating the marketing control. So I don’t think we need to do too much there. In terms of the other investments that we had, we said, we’d like to be majority shareholder in those. Because we think those are the second best potash properties in the world and that hasn’t changed. But you got to be patient to make sure you don’t over pay and get what you want over the long-term and you do with sensitivity to see communities that you operate in.

When you think about our activity over the years, when we first invest in the United States, we went into the Florida with the Oxy acquisition or into North Carolina with the Texas Gulf acquisition or into the nitrogen business, everyone of those communities in which this foreign investment has been placed really appreciate Potash Corporation. In Trinidad, the way we behave in Trinidad, and way we look after people and way we get back to the communities. I mean, just a small indication of how we might act in other places in the world.

Denita C. Stann

Perhaps we’ll have time for just one more question.

Operator

Thank you. The last question today comes from Yonah Weisz of HSBC. Please go ahead.

Yonah Weisz – HSBC Bank Plc

Hi guys, good afternoon. Just a question on potash delivery; the potash demand in the first quarter and perhaps in the first half from China, how is that contract being executed? Even keel over first half or second half or will there be a concentration into the rig in either, probably the first quarter or second quarter or concentration in the first or second quarter?

William J. Doyle

All right Yonah, I am going to ask Stephen Dowdle to comment on that one.

Stephen F. Dowdle

Yeah, the bulk of those deliveries will occur during the second quarter. The second quarter will be a heavier delivery period than the first quarter. The first quarter of course we have had they were still signing contracts in January with some of the other producers and of course you have the Chinese holidays which slowed things down a bit, but the shipments are going steady and there is a good lineup and it looks like at least from the Canpotex side that contract should be largely fulfilled by the end of the second quarter.

Denita C. Stann

Thank you everyone. We appreciate your time today and don’t hesitate to give us a call at the office if you have further questions.

Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. Please disconnect your lines.

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