Potash/Phosphate

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Premier Brad Wall says he’s pleased with PotashCorp’s progress in keeping promises it made to the province at the time of the attempted takeover by BHP Billiton in 2010.

“We get a report from (PotashCorp), and I’ve had a chance to talk to (CEO) Bill Doyle directly about it. We had a conversation about the status of the pledge and I think Saskatchewan people should be pleased. We’re certainly pleased,” Wall said.

“They’re heading toward the exact number they promised for head office jobs. They’ve had so many move up from Illinois.

“They’ve actually exceeded their targets for overall numbers of employees. They’re moving in the right direction in terms of aboriginal employment,” he added. “And from a corporate citizen standpoint, here’s a company that has exceeded their pledge, frankly, I think, and expectations.”

As examples of that, Wall pointed to PotashCorp’s contributions to the STARS air ambulance program and to the new Global Food Security Institute.

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The potash cartel collapsed, at least for now, and the oil cartel could be next

Cartels are tough to maintain as we have recently seen with the demise of the Russian-Belarusian duopoly that accounts for over 35% of world potash production. The North American Canpotex cartel accounting for another a third of global output faces a sharp reduction in profits.

The stock and bond markets have responded in kind. Potash Corporation, the leading global producer, has seen its credit rating downgraded by Standard and Poor’s from stable to negative following a steep drop in its stock price from $38 to $30.

Yet, not all cartels fall apart. OPEC has been in operation since 1960, first successfully manipulating global oil prices by reducing supply after the Yom Kippur war in 1973. Today, it is the swing producer, producing 32.4 million barrels per day (roughly 45% of world crude production in 2012). OPEC itself is dominated by Saudi Arabia, which accounts for almost one-third of OPEC production.

If a potash cartel can fall apart, could it happen to OPEC?

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The National Post is Canada’s second largest national paper.

As Bill Doyle sees it, last week’s shocking turn of events in the potash industry is nothing to worry about. “I would just urge people to take a deep breath, relax, and everything’s going to be just fine,” the chief executive of Potash Corp. of Saskatchewan Inc. said in a unique question-and-answer webcast on Wednesday.

Mr. Doyle is eager to put shareholders’ minds at ease following the stunning news that Russian producer OAO Uralkali has broken up a cartel-like trading company and plans to max out its potash production to seize market share. It made the move after its partner Belaruskali sold product outside their arrangement.

Investors assumed that the days in which potash producers withheld production to maintain high prices are now coming to an end. But Mr. Doyle disagrees completely.

He said that there have been numerous spats like this one in the past between the Russians and Belarusians, and all of them were eventually resolved.

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The jolt experienced in the potash industry should be a wake-up call for the provincial government, NDP Opposition Leader Cam Broten says.

“A wake-up call that shows that we need long-term savings, that we need investments in infrastructure while we can, and a wakeup call to this government that we need to diversify the economy,” Broten said.

Shares in potash companies like Saskatoon-based PotashCorp, Mosaic and Agrium have plunged over the last couple of days after Russia’s potash giant OAO Uralkali said it would exit the export marketing group Belarusian Potash Co. and increase output to full capacity.

Experts say potash prices could fall by 25 per cent, which would impact the royalties the province takes in from the industry. “(That) has the potential to be significant, if you look at the contributions it makes to the provincial coffers as well as the thousands of jobs, the homes that are purchased and the spinoff industries,” Broten said.

“What we’ve seen with this government is an approach to have all of the eggs in one basket.

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There was a time not so long ago when the Russians threatened us with nuclear annihilation. That they now are only threatening our potash revenues is a big improvement. This, we can handle.

Stuck with piles of surplus potash, the Russians have withdrawn from an international producers’ cartel that helped stabilize prices. They now will unload their potash for a lower price, compelling producers elsewhere to do likewise.

In Saskatchewan, it’s a swift kick right in the potash revenues. The precipitous drop in share prices for Saskatchewan potash producers could foretell the future for provincial royalties.

Potash Corp. of Saskatchewan shares fell overnight by 25 per cent, Mosaic shares, likewise. If provincial potash revenues are similarly reduced, we’ll have to turn in our New Saskatchewanembroidered silk underwear and go back to the old, cotton flour bags with the corners cut off for our legs to go through. Good thing we saved them.

Don’t panic, counsels Premier Brad Wall. Of course, urging us not to panic is the premier’s job. When the time does come for panic, Wall still will be saying don’t panic.

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