PotashCorp on March 16 said it plans to reduce 2009 potash production by an additional 1.5 million mt, bringing the total expected curtailments of operational capacity this year to at least 3.5 million mt. The company said the additional curtailment “reflects the continuing near-term draw-down of customer inventories as they work through stockpiles built prior to the global economic crisis.”
Specifically, PotashCorp’s Rocanville mine will go down for four weeks, from April 5 through May 2, while the Allan and Lanigan mines will go down for eight weeks, from April 19 through June 13. The company said 940 employees would be affected, but roughly a third of those will be called back to help maintain the plants during the idled periods.
“Farmers, like other consumers, have been on a buying hiatus, but they cannot remain on the sidelines indefinitely,” said PotashCorp President and CEO Bill Doyle. “People need to eat; farmers need to grow and sell crops; and maintaining soil fertility is essential for those things to happen.”
Many in the industry have wondered if potash producers would lower prices to spark movement for the spring planting season, but Doyle’s comments indicated a pricing cut was unlikely. “It has been demonstrated in other fertilizer products that significantly lowering prices does not encourage additional volume and, in potash, would carry additional risks to capacity expansions that are necessary to ensure future supply,” he said. “We operate with a long-term view and our goal is to be ready when more potash is needed ?Çô not only in the second half of 2009, but for the years ahead.”
PotashCorp’s initial announcement of potash production curtailments came last December, when it said it would reduce 2009 potash output by 2 million mt beginning in January due to a short-term deferral of demand around the world (GM Dec. 15, 2008). The company followed that announcement by sending temporary layoff notices to 940 workers at the Rocanville, Allan, and Lanigan mines in Saskatchewan, indicating the layoff was to span from Jan. 18 to March 14, 2009 (GM Jan. 5, p. 1).
PotashCorp said the additional curtailment is “consistent with our strategy of matching potash production to market demand as we have over the past two decades. With all key markets expected to be largely depleted of inventories in the second quarter, we anticipate a strong rebound in potash demand in the second half of 2009 that should continue into 2010.”
PotashCorp added that it will be well positioned to deliver more potash from newly-completed capacity expansion projects at its Lanigan and Patience Lake facilities. In addition, work will continue at its remaining expansion projects as the company prepares for what it anticipates will be strong demand over at least the next five years.
In other news, PotashCorp reported that the Number 04 ammonia plant at the PCS Trinidad nitrogen complex was down following a “loud noise” and a fire that occurred at 7 p.m. on March 12. The fire was quickly put out and no injuries were reported, but PotashCorp said the plant was closed while an investigation is completed to determine exactly what happened. A company source estimated that the plant will remain down for a month, and would not speculate on the extent of the damage until the investigation is complete.
The Number 04 ammonia plant has annual capacity of 635,000 mt and is one of four ammonia plants at the 130-acre Trinidad complex. The incident did not affect the urea production facility that is also located there. The company said all regulatory authorities were notified following the incident.