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OTTAWA — There are two ways to read Potash Corp. of Saskatchewan’s announcement on Tuesday that it is cutting 1,050 jobs and tooling down some production. The first is that demand from developing markets has been soft and that the cuts are necessary to reduce costs. Falling corn prices in the U.S. have also hit potash pricing, which typically moves in tandem with the grain.
The second way to read Tuesday’s news is more interesting. The folks from Saskatchewan may be sending their Slavic rivals a message: “Pay attention to what we’ve done today. We want to end this little war we’ve been having, and so should you. Then we can return to normal, and get back to minting fat profits.”
Remember that potash is predominantly mined in two areas of the world with massive subterranean deposits – Saskatchewan and a region spread out over the former Soviet Union. The three miners in Saskatchewan – Potash Corp., Mosaic and Agrium – have sold overseas for years through their jointly owned marketing organization Canpotex while Russian producer OAO Uralkali and Belaruskali, owned by the state of Belarus, had a similar joint venture called Belarusian Potash Co. or BPC.
The two groups have acted as cartels (a charge they dispute), doing everything possible to keep prices high. In the case of Potash Corp., that has meant slowing production to a crawl and throwing people out of work at times to protect prices by keeping supply tight.
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