Oversupply leads to steep drop in potash prices
Oil’s downfall may get more attention but the potash industry that forms the bedrock of the Prairie mining industry is going through its own bust — and analysts say there’s no quick recovery in sight.
Potash, the lightly coloured mineral used as a crop fertilizer, is big business in Canada. Last year, producers dug out $6.7-billion worth of it, putting it second only to gold in terms of produced mineral value in the country.
But like oil, a wave of overbuilding and production increases in recent years — spurred by a spike in crop prices and a perceived demand that didn’t quite materialize — have left the market flooded with supply. “We have become grossly oversupplied with potash,” said David Asbridge, president of fertilizer advisory firm NPKFAS. “It’s going to take a while for us to dig ourselves out of this hole.”
Drop in prices
The glut has led to a steep drop in prices, with the Potash Corp. of Saskatchewan reporting an averaged realized price in the second quarter of US$154 per tonne, compared with a brief peak of around US$900 a tonne in 2008 and still over US$400 just a few years ago.
The fallout has been mine closures, layoffs and a big cut in government revenue as companies try to preserve their cash and stay profitable, said Brooke Dobni, a professor at the University of Saskatchewan’s Edwards School of Business.
“They’re doing everything from A to Z, from closing plants, reducing production, (to) cutting dividends to shareholders,” said Dobni.
The Mosaic Co. cut 330 jobs last month when it suspended production at its potash mine near Colonsay, Sask., while Potash Corp. has instituted some temporary closures at mines in the province to reduce supply.
For the rest of this article, click here: http://www.cbc.ca/news/canada/saskatchewan/oversupply-drop-price-potash-saskatchewan-1.3721671