Potash Corp. of Saskatchewan Inc.’s decision to cut 18 percent of its workforce and reduce capacity probably foreshadows similar actions by North American rivals amid a price war in the $20 billion global potash market.
Potash Corp., the world’s largest fertilizer company by market value, said yesterday it will close a Canadian potash mine, lower output at another and halt a processing mill. Calgary-based Agrium Inc. and Mosaic Co. of Plymouth, Minnesota, are likely to follow with job and capacity cuts, said Peter Prattas, an analyst at Cantor Fitzgerald LP, and Mark Gulley, an analyst at BGC Partners LP.
"Something has to give," Gulley said yesterday in a telephone interview from New York. "They have to be looking at the same issues in terms of price and profit-margin pressure."
The potash industry has been in turmoil since the end of July when Russia’s OAO Uralkali, which produced more of the crop nutrient last year than any other company, quit a sales accord with its Belarusian competitor. Uralkali’s strategy now is to raise output to gain a bigger market share. That’s spurred some customers to defer purchases in anticipation of lower prices.
Richard Downey, an Agrium spokesman, declined to comment on whether his company plans moves similar to those of Saskatoon, Saskatchewan-based Potash Corp. He said Agrium is constantly monitoring costs and in October announced a plan to lower costs and increase returns.
"We always monitor market conditions and align our resources to meet both short- and long-term demand, while remaining cost-competitive," Rob Litt, a Mosaic spokesman, said by e-mail.
Potash is a form of potassium used by farmers to strengthen plant roots and boost resistance to drought. Global sales are valued at about $20 billion a year, according Neil Fleishman, an analyst at Green Markets. The market is dominated by producers in North America and the former Soviet Union.
Exports from Agrium, Mosaic and Potash Corp. are coordinated via their Canpotex Ltd. joint venture. Uralkali and Belaruskali, the state-owned supplier in Belarus, had a similar venture until July 30 when the Russian company ended the accord.
Potash Corp. said yesterday it will eliminate about 1,045 jobs at its potash and phosphate-fertilizer operations in Canada, the U.S. and Trinidad. The job losses are the worst for the company’s potash division since 1987, Chief Executive Officer Bill Doyle said in a telephone interview yesterday.