The potash market is susceptible to wild swings in demand as consumers are able to put off purchases for more than a season if prices are high.
Chinese and Indian consumption drove the potash price from $100/tonne in 2004 to almost $900/tonne in the run up to the 2008 recession when the boom went bust and prices rapidly fell back to $350/tonne.
After trading in the $500–$540 a tonne range for most of last year, the price of potash – a key ingredient in fertilizers – has steadily declined this year to its current levels of under $460 a tonne.
The downturn claimed more victims this week.
Brazil's Vale announced on Thursday that it is delaying a $3 billion fertilizer project in Saskatchewan, Canada that would have added 2.9 million tonnes of potash to the market.
“We find ourselves in some challenging economic times today and we have reviewed the projects that we have on our plate, one of those being the Kronau project, and we have made a decision to postpone it for the time being,” Vale executive Cory McPhee told the Financial Post.
Also on Thursday, world number one potash producer PotashCorp announced that it will shut down its Lanigan, Saskatchewan mine for nearly a month from the middle of September in an effort to "match supply with market demand."
Amid one of the worst droughts in American history, North American potash inventories were 30% above the five-year average in July despite a sharp drop during the month.