PotashCorp President and CEO Bill Doyle told analysts Oct. 25 that the company is putting new potash sales on hold until the dust clears from new developments occurring in Russia. Doyle noted reports out of an IFIA meeting in Vancouver earlier in the week that a growing crater in Berezneki, in Russia’s Perm Region, is threatening a rail line that ships out potash from major Russian producers.
On Friday, Oct. 26, JSC International Potash Co. issued a press release. It said that on Oct. 24 the sinkhole, caused by flooding of the Berezniki I mine at JSC Uralkali, grew by 30 meters towards the rail line used for potash shipments by JSC Silvinit. The crack is about 100 meters away from the 800-meter bypass railroad line. The company is monitoring the developments in the area on a constant basis. It hopes the growth of subsidence will slow down in winter conditions and the negative consequences will be mitigated by the launch of a new 6-kilometer long bypass. Construction of the rail line is scheduled to be completed in February 2008. In view of this situation, JSC IPC said it may suspend potash shipments in case of force-majeure. Still, the company hopes that the rail deliveries will continue uninterrupted until the construction of the new bypass.
Silvinit, which represents approximately 10 percent of the global supply picture, reported that it produced 5.3 million mt of potash in 2006.
Doyle said construction of the new rail bypass could be delayed due to wintertime conditions in the region, and that a three-month delay in getting this rail link in order could significantly change the potash world. Doyle added that it would be “hold on to your hat,” as it would have a major impact on pricing. He told analysts that it was his understanding that officials with Indian Potash Ltd. have offered their employees to aid in constructing the new rail line.
The Silvinit woes go back to the 2006 flooding of the JSC Uralkali No. 1 mine (GM Oct. 30, Nov. 6, 2006). That particular mine and its 1.2 million mt/y of production was lost to the flood. The flooded mine was near the rail line, and this already required one bypass to be built.
Doyle said that in North America, allocated tons will go to existing customers. However, he said no new sales will be made in North America or from New Brunswick. He also expects Canpotex, the Saskatchewan producer export group of which PotashCorp is a major participant, to consider a similar action.
Green Markets surveyed other U.S. producers to see if they are taking similar actions. Agrium Inc. said supplies are so low that is there is not that much to sell anyway. “The potash market is very tight right now and Agrium (and other potash producers) have very limited potash available for sale on a priced basis right now beyond what is already committed,” said Agrium’s Richard Downey.
The Mosaic Co. spokesman Doug Hoadley agreed, saying his company had not been selling product in the past two weeks as it is sold out. Instead, the company has been gearing up for a December fill program in which prices will be up $30/st.
Intrepid Potash has been allocating product since Oct. 1 and will not be taking any new rail orders before January.