Nutrien Ltd., Saskatoon, has announced temporary layoffs of over 600 employees and the idling of production at its Allan and Vanscoy potash mines in Saskatchewan. Nutrien spokesman Will Tigley told Green Markets that 140 employees will be affected at Allan and 470 at Vanscoy. Both mines serve both the North American and Canpotex markets.
“We don’t really think it’s going to impact our potash output for the year,” said Tigley. He said the return to operations will depend on rail capacity. The company said rail delays have caused inventories to pile up, and Nutrien is working with the railways to ship what it can.
“The mines have a combined nameplate capacity of ~7 million mt and estimated operational capacity of ~6 million mt,” said Green Markets Director of Research Neil Fleishman. “While the company said total output for the year should not be affected, a prolonged curtailment of these mines could impact global supply.
“Prior to the merger, Potash Corp. of Saskatchewan Inc. had developed an extensive recent history of temporarily idling mines to manage supply to the market,” he added. “It most recently curtailed Allan and Lanigan to start 2018. However, if the purpose was to limit supply to the market, the company would be unlikely to shift the burden of blame to its rail operator given it has not previously obfuscated the reason for idling mines.”
Canadian National, which handles most of the rail deliveries from the two mines, said it is current with all deliveries at Nutrien and its orders. CN acknowledged delays in January, but maintained that it was able to rebound in February and March and move all orders for Nutrien and Canpotex.
Tigley said CN’s statements are accurate. “We did not try to name any of the railways or vendors in our original statements and are continuing not to get into detail on our specific relationships and what their commitments are with our business.”
Canadian Pacific Railway told Green Markets that the company “continues to work closely with our potash customers, delivering record levels of potash exports in the first quarter. We expect strong demand to continue through the remainder of the year, and look forward to delivering for our customers.”
Some 3,400 train conductors and engineers are currently embroiled in a labor dispute with CP (GM April 20, p. 1), threatening additional operational disruptions in the weeks ahead. Members of the Teamsters Canada Rail Conference (TCRC) and the International Brotherhood of Electrical Workers (IBEW) agreed on April 20 to a recommendation from federal mediators to vote on a new contract offer from CP, but the union leadership is urging members to reject the offer (GM April 27, p. 1). TCRC reported this week that the member vote will occur May 14-23, with the results likely to be announced on May 23. A walkout could commence after that if the offer is rejected.
In related news, The Mining Association of Canada (MAC), on April 30 expressed “profound disappointment” and “frustration” over the failure of legislation to advance in the Canadian Senate that it believed would improve rail transportation in Canada.
“The effectiveness and reliability of rail freight service is critical to Canada’s mineral investment competitiveness, and this move by the government will diminish that competitiveness,” said Pierre Gratton, MAC president and CEO. “How many mill closures and job losses, lost customers, and abandoned investments will it take before a Minister of Transport and his or her department recognize that their oversight of Canada’s railway system is failing? Despite a commitment to ensure that our industry remains competitive, the government has failed to modernize the Canada Transportation Act in a way that balances the interests of shippers and railways and ensures that our wealth- and job-creating industries are protected from the railway’s unbridled market power.”
Gratton noted that mining is the single largest customer group of Canada’s railways, accounting for 19 percent – one-fifth – of the total value of Canadian exports, and over half of total rail freight revenue generated each year. However, he said that an unlevel playing field renders many shippers, including many mining companies, captive to one railway, and therefore beholden to railway market power.
He said the failure of the legislation to advance was a damaging signal to members’ international customers. “There are significant costs associated with transporting goods to and from the mine site, and companies need to get their goods to their international customers on time,” said Gratton.
Gratton noted that the mining industry is a major sector of Canada’s economy, contributing $57.6 billion to national GDP and representing 19 percent of the value of Canadian goods exports in 2016. He said the sector employs 596,000 people directly and indirectly across the country, and that it is proportionally the largest private sector employer of Indigenous peoples in Canada and a major customer of Indigenous-owned businesses.