So we should expect the contract to be settled very soon for India. To the market itself, India has seen very strong demand increases in the first quarter, supported by very good affordability of potash in the market. With a very low input of potash in Q1, India as a country, they won’t have to double the input right now in order to meet their major season, the summer season, Safra season for both direct application and also for NPK production. With that reason, we believe the contract is going to be settled very soon. I’m not going to speculate the numbers. You might have seen a lot of numbers reported by the publication, and we believe that is likely going to be the level, and that’s how we modeled our Q2 price forecast as well. In terms of the China contract, we believe the contract will be settled in the next month or two as well.
If you watch the inventory situation at a port level, there are some higher number reported, but some of the missing parts that I’d like to call out on the port inventory in China, the port inventory level in China has stayed above 3 million tonnes. That has come down over the last few weeks, with a very low input by rail in the northern part of the country because of lacking of a monthly price settlement with the Russians, which is a signal of the price close to the bottom. he April seaborne import also started to get into the bonded warehouse, which basically meaning that’s the end of the 2023 contract execution. Lastly, I wanted to remind you also looking into domestic production. The production last year was down by 1 million tonnes. The overall ending inventory at the domestic producer side was down by close to 1 million tonnes as well.
So when you think about port inventory, you also need to think about the domestic producers’ inventory. So adding together, the inventory level isn’t as high as people see just from the obvious port inventory. Lastly, I want to mention potash consumption in China last year increased significantly. We believe that the growth was over 20%. And those driven by a relatively low price of potash to phosphate and urea and remind you, 70% potash consumed in China is through NPK compound NPK, therefore, relatively lower price has led to a much higher inclusion of potash consumption. So all in all, we believe that China needs to come back to the table for the new contracts as well. We can’t really pin down a time in our own forecast have that — we have that projected to be at a later part of Q2, that price level also reflected in our forecast as well.
Thanks.
Operator: Our next question comes from Adam Samuelson from Goldman Sachs. Please go ahead with your question.
Adam Samuelson: Yes. Thank you. Good morning, everyone. Appreciating that there are a lot of moving pieces right now in your U.S. phosphate business between downtime and kind of some of the fire and the like, both in the turnarounds of the dragline and the chemical plant and the ammonia plant, et cetera, have a plan to get production to an annualized rate of about 2 million tonnes by the end of the year. And I think in the slide, you talk about a $15, $20 a tonne improvement in conversion costs when you get there. What — how do we think about the benefits beyond just improved conversion costs as we consider kind of a greater proportion of internally produced ammonia, which should be cheaper? If you think about improvements on your on your rock costs and where those can go from Florida or the need to use a bigger portion of Miski Mayo rock, where — how long could you see those cost improvements sustain themselves before you start to have to make bigger investments again in new rock reserves in Florida.
And put all that into context of how you see Mosaic’s Florida phosphate position on the global phosphate cost curve? Thank you.
Bruce Bodine: Yeah, Adam, a lot to unpack there. But for sure, we are working hard, as you have well described, to get to that 2 million-tonne run rate by the end of the year. And as we’ve said and as you’ve pointed out, we got pretty significant turnaround schedule still in quarter two, a little bit into quarter three. There’s another sulfuric acid turnaround at our Bartow facility in quarter four. So there is still a lot of work to do to get caught up on all of the pent-up maintenance issues from COVID and some of the hurricanes over the last several years. But feel very good about where we’ll be come the end of the year on that run rate. And to your point, and I think in our materials, it’s actually $20 to $30 a tonne, not $15 to $20, if I heard you right, improvement just on cost absorption alone.
And then on top of that, probably included on the top end of that range is benefits on power generation through better sulfuric acid and steam utilization as well as better water treatment costs as when we’re not running hard, we don’t have as much evaporative heat for our water balance and then we have to use more expensive options like reverse osmosis and lime treatment to handle our water from a process standpoint. So I think those are structural from cost absorption on volume and/or real benefits from just running harder that are sustainable and will continue to fall in line. To your point about rock itself, we’ve got pretty 30 years of reserves to maybe 40 years of reserves — it’s always been — and I think if you look probably deeply into our 10-K and some of our publications, you’d see that there are — there is a plan, ultimately, at some point in time, look to build a new greenfield beneficiation plant in our Desoto reserve.
But we’re doing everything we can with projects that we’ve previously announced, such as Eastern extension at South Fort Meade, to buy additional reserves for existing beneficiation plants to extend out that kind of new greenfield horizon for a new mine. So there’s also South which is idle that we can restart. There’s a number of things within our reserve base that would allow us to continue to use our integrated rock source to realize those benefits for a long period of time. And then try to push that large greenfield investment at Desoto as far as possible. Hopefully, that addresses most of the questions.
Operator: Our next question comes from Ben Theurer from Barclays. Please go ahead with your question.
Ben Theurer: Yeah. Good morning, and thanks for taking my question. Just wanted to kind of follow up on some of the global dynamics and what you’re seeing in terms of just the global supply and how you think some of the proposed changes to tariffs and duties into the U.S., Russia down, Morocco up again. So it seems like that authorities don’t know what they do because they just changed it the other way around a few months ago. How do you feel about this just internal — and what are like consumers actually demanding and asking for? And where do — where does Mosaic fit into that equation?
