Houston, 15 November (Argus) — Agrium is reassessing its strategy for the future as it delays plans for a new potash mine project in response to poor global demand.
Talk of building a greenfield facility in Saskatchewan will be postponed for “a couple of years” because of uncertainty surrounding the international potash market, management said. The company reported last week that it saw a 56pc drop in its third quarter earnings year-on-year due to poor potash demand.
The global potash market is weak because China and India have yet to settle new bi-annual supply contracts with producers. In response, Potash Corporation Saskatchewan and Uralkali, two of the world's top producers, announced production cut backs, in the face of inventories that are uncomfortably high. Since the end of May, the midpoint price for Canadian standard muriate of potash (MOP) has decreased $20/t fob at Vancouver to $462.50/t. It is expected to fall further until new demand brings price support.
Brazilian mining company Vale announced in the summer that it would postpone the development of its $3bn Kronau project in Saskatchewan. But BHP Billiton recently said it would go forward with its Jansen, Saskatchewan, potash project. When complete, that site will be the world's largest mine producing 10mn t/year.
Agrium hasn't lost all hope for the market. “We may see a slight decrease in phosphate and potash in Q4 in those areas that were affected by drought,” Mike Wilson, Agrium president and chief executive, said. “We're awaiting the completion of negotiations with China and then followed by India…So we see a recovery [in the market], but you likely won't see a huge recovery until the second half of 2013.”
The company attributed reduced profit margins in potash to the planned eight-week turnaround of the Vanscoy, Saskatchewan potash mine and a longer than expected production restart, which is undergoing brownfield expansion. Vanscoy, which has a capacity of 2mn t/yr, will operate at a normal rate next year, and is not scheduled to have another major turnaround until the second or third quarter of 2014.
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