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| WORLD FERTILIZER |
NOVEMBER 2016
cash costs due to its geology. Picadilly was expected to
ramp up to a capacity of 1.1 million t in 2015, with the
nearby Penobsquis mine to run in tandem during the
Picadilly ramp-up. However, decommissioning at
Penobsquis was bought forward to the end of November
2016.
PCS President and CEO, Jochen Tilk, said, in an investor
conference in Canada in January, that in 2007 when
investment began at the Picadilly mine, expectations for
annual potash demand in 2015 were around 70 million t,
however demand last year came in at 59 million t.
“In a commodity business in a difficult time, you
consolidate, you rationalise and you optimise,” Tilk said in
July.
At the investor conference, Tilk said production
would be focused on PCS' lowest costs mines where cash
costs are around US$40/t. However, he was unwilling to
divulge the costs of Picadilly.
Mosaic followed suit in announcing cutbacks, with its
2.6 million t capacity Colonsay mine idled in July.
Mosaic said its lower-cost mines of Esterhazy and
Belle Plaine, in combination with inventory, would allow it
to meet the short-term supply needs.
The shuttering of the Colonsay mine followed lower
production from Uralkali in Russia, with its Q2 production
at 2.5 million t, down from 3 million t in 2Q15. Its H1
production was at 5.1 million t, compared with 1H15 at
5.7 million t. BPC also reduced production to around 70%
of capacity.
Meanwhile, Agrium had been busy increasing its
capacity, with it completing the Canpotex proving run for
the 1 million t production expansion at its Vanscoy potash
facility in Saskatchewan in December 2015.
The enhanced facility now has an annual nameplate
capacity of 3.024 million t and the producer said it
expects its Canpotex allotment to be approximately 10.5%
of the organisation’s total international shipments in 2016.
Canpotex said in February it would reduce
January – June export volumes by at least 1.5 million t and
also flagged the possibility of further reductions to sales
volumes in 2H16.
Canpotex decided in June not to proceed with the
construction of a new export terminal at the Port of
Prince Rupert in British Columbia, and is instead set to
rely on its terminals in Vancouver, Saint John and Portland,
Oregon. The facility was expected to cost CAN$775
million (US$602 million) and was initially expected to be
operational in 2012.
US-based Intrepid Potash idled operations at its
New Mexico-based West facility and transitioned the
facility to care-and-maintenance mode in July. The West
mine generated 42% of Intrepid’s potash production in
2015 and has a capacity of around 380 000 tpy.
Germany’s K+S did not make any cutbacks due to
prices, however, the producer struggled to operate at full
capacity at a number of its sites due to saline wastewater
disposal issues.
K+S said in July its Unterbreizbach site had resumed
operation, but continuing operations were not
guaranteed. At its Werra site, production is also being
affected by saline wastewater issues and available basin
capacities. At the Hattorf site, production remains
suspended since June, due to similar issues. Only K+S’
Wintershall site has not been affected by production
shut-downs.
Outlook
With delays to the start of production at K+S’s Legacy
mine, sentiment was further bolstered in August when
BHP Billiton signalled it may shelve its Canada-based
Jansen project if the outlook for potash does not
improve. It said while the two shafts will be completed
sometime in 2018 or 2019, the board will then decide
whether to build the mine, despite US$2.6 billion spent in
development.
BHP has previously said it was open to having a
partner on the project, but shareholder sentiment is
tending towards moth-balling the mine.
In mid-August, Jansen was at 60% completion. The
project was at 54% complete at the end of 2015. Its
current investment is to finish the excavation and lining of
the production and service shafts and to continue the
installation of essential surface infrastructure and utilities.
However, capacity increases and a more aggressive
strategy was emerging from the CIS region, with Uralkali
moving towards a delisting from the Moscow Stock
Exchange and new capacity from EuroChem expected in
2017, while BPC continued to build its new mines.
In early September, Uralkali reduced its free float
shares on the Moscow exchange via its buyback
programme to about 6.5% of the company’s capital. Under
the exchange listing rules, if a free float remains below
7.5% for six consecutive months the share will be
excluded from the level 1 ‘blue chip’ quotation list.
The expected delisting on the Moscow Exchange
could be a prelude to a merger with Uralchem, which
already owns 20% of Uralkali’s shares.
Despite the possibility of a tie-up of the Russian
majors of Uralkali and Uralchem, moves are still afoot to
return Uralkali and BPC to a partnership. Other Uralkali
major shareholder Onexim sold its 20% stake to
Belarusian businessman Dmitri Lobyak in July. The sale
came shortly after Belarus’ president Alexander
Lukashenko suggested agreement between Belaruskali and
Uralkali could happen again.
Table 1.
Producer sales volumes
Sales volumes (KCI
tonnes)
1H16
1H15
Uralkali
4.9 million
5.6 million
PotashCorp
3.905 million
4.861 million
BPC*
3.8 million
4.6 million
Mosaic
3.586 million
4.369 million
K+S
3.17 million
3.55 million
ICL
2.041 million
1.86 million
Agrium
1.153 million
694 000
APC
782 000
1.093 million
Total
18.437 million 21.027 million
Source: company reports, *K20 to KCI export tonnes.
