Nutrien Ltd., Saskatoon, said on June 7 it expects to increase potash production by approximately 500,000 mt in second-half 2021 compared to earlier expectations, in response to tightening global potash market conditions. Nutrien noted that it has a flexible network of six potash mines with competitively positioned, available capacity that it can utilize to help supply global demand.
“We are responding to strong market fundamentals to ensure our customers have the crop inputs they need to feed a growing population,” said Ken Seitz, Nutrien’s Vice President and CEO of Potash. “Our network of flexible production and extensive logistics is designed to provide reliable supply, and we have a unique ability to be agile and respond to changing market conditions. Our potash asset portfolio is optimally positioned to meet customer needs and drive shareholder value.”
Nutrien said domestic and offshore potash sales volumes are currently fully committed through September, based on its original production profile for 2021. Nutrien said it will be actively hiring additional employees and adapting its resources to help increase production across most of its potash mines, ramping up its Vanscoy facility in particular, and will ensure the highest safety standards are maintained in the process.
Nutrien expects these actions to result in upward revisions to potash-related guidance for second-half 2021 from both a volume and EBITDA perspective, which will be addressed in second-quarter 2021 results. Nutrien said it continues to actively monitor the market and evaluate other potential options to further increase production if demand warrants it and may provide additional information in this regard at a later date.
The Nutrien news quickly followed a June 4 announcement by The Mosaic Co., Tampa, that it would be cutting production by 1 million mt through March 2022 (GM June 4, p. 1) as a result of the earlier-than-expected closure of its K-1 and K-2 shafts in Esterhazy, Sask.
“While we’ve successfully managed brine inflow at K1 and K2 since 1985, inflows accelerated over the past couple of weeks and we were faced with inflow rates that exceeded our pumping capacity,” Mosaic CEO Joc O’Rourke told attendees of the Exane BNP 23rd European CEO Virtual Conference on June 7. “On June 3, we made the decision to stop all work as inflows reached the point where it could be a potential risk to the safety of our underground workers. So we immediately accelerated the transition to K3. We also decided to resume operations at Colonsay.”
The company expects 2021 potash sales volumes to fall to 8 million mt, down 800,000-900,000 mt from original expectations.
O’Rourke reiterated that when K3 reaches full production it will be one of the lowest-cost potash mines in the world. “Looking forward, by the middle of 2022, we will have fully transitioned Esterhazy to K3. As we originally planned, K3 tons combined with Belle Plaine’s capacity will provide 9 million mt of the lowest-cost production in North America.” The company hopes it will get phase two of Esterhazy K3 in operation in fourth-quarter 2021, though it is working to accelerate that into October.
Colonsay production could add another 2 million mt to 2022’s 9 million mt, though the company noted these will be higher cost tons. Costs were put at $100/mt at its idling in 2019. By comparison, first-quarter 2021 costs averaged $64/mt excluding brine management costs.
O’Rourke said the company is changing its Colonsay operating model and believes there is an opportunity to bring costs down, but it will not know that until full operations have resumed. “We’ve always viewed Colonsay as an option to be exercised in a strong market like the current environment and as a way of mitigating inflow risk.”
O’Rourke said near-term revenue losses from lost sales could easily be offset by expected price increases. The company said that before its June 4 announcement, the potash market was already in a rally based on potential sanctions against Belarus Potash Co. After its own announcement, Mosaic said it saw $20 price increases in the U.S. and price quotes in Brazil going up $50-$100/mt.
“My expectation is that Europe will do something,” O’Rourke said regarding sanctions. “I wouldn’t guarantee it, but if I was buying into Europe, I would be very cautious about buying Belarusian product because of the fear of those sanctions. And what we’re hearing in the U.S. is the same sentiment. There’s some 700,000 tons a year from Belarus that comes into the U.S.”
If sanctions are imposed, O’Rourke said he believes it will come down to trade flows, with BPC having to go to lower return markets.