Goldman Sachs (NYSE:GS) sees the rate of demand for potash fertilizer to grow at an annual rate of four percent over the next several years, citing increasing emerging market food demand as the catalyst.
For the most part, during that time, new capacity shouldn't put any downward pressure on potash prices, as it'll take time for it to come online, so in the short-term is shouldn't be a factor.
In the long term, on the other hand, it could also not be that relevant, as eventually the global economy will rebound, and even if it takes several years, demand will increase, and even with more supply prices could hold up because of that increase in potash demand.
The more important question for existing potash producers is how they'll respond to BHP Billiton's (NYSE:BHP) entry into the market, which over time will definitely be a major player in potash.
Some have started looking for acquisitions to build up scale in order to compete on price if BHP goes that route as their strategy. That's a way away yet, but it is something that must be included in long term strategies by potash companies, who will regret ignoring BHP if that's how they think and respond.
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