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Mining News Pro - The company’s move contrasts with the position of other potash companies, including Canada’s Nutrien (TSX, NYSE: NTR), the world’s largest producer of the fertilizer ingredient.
According to Mining News Pro - US fertilizer producer Mosaic (NYSE: MOS) has temporarily cut back production at its Colonsay potash mine in Saskatchewan, Canada, due to slower-than-expected demand.
Prior to the curtailment, Colonsay had been operating at a yearly run rate of 1.3 million tonnes and Mosaic had plans to expand output to between 1.8 million and 2 million tonnes by late 2023.
The company’s move contrasts with the position of other potash companies, including Canada’s Nutrien (TSX, NYSE: NTR), the world’s largest producer of the fertilizer ingredient.
The Saskatoon-based firm and other North American potash miners ramped-up production after Russia’s invasion of Ukraine in February this year.
Nutrien said in November it planned to boost potash production capacity to 18 million tonnes by 2025, representing a 40% increase from 2020 levels.
The company believes the market will continue to face global shortages as supplies from Russia and Belarus are becoming more limited than anticipated.
About 60% of new production that was expected to come into the market over the next five years was in Russia and Belarus. Currently, it’s unclear how much of that will come online.
BHP (ASX: BHP) decided in July to speed up construction at its $5.7 billion Jansen potash mine in Canada.
The world’s largest miner had originally planned to kick off production at Jansen in 2027, but it now aims to bring online the first phase of four development stages a year earlier.
Mosaic, however, says it has enough inventory to meet demand in the short term.
The Colonsay potash mine reopened in June last year, after being temporarily closed in August 2019 and indefinitely in January 2020.
Joel Jackson, mining equities analyst at BMO Capital Markets, said the announced production cut at Colonsay may be the next step in a potash bottoming process.
“We’ve been waiting for a curtailment announcement since September as a game of chicken has developed between suppliers and buyers-growers,” he wrote.
“Historically, Nutrien or Mosaic announcing curtailments was typically a positive development for price, though in the end, Mosaic could simply be slowing down Colonsay for a small number of weeks that includes the holiday break, so this could simply be in this game of chicken some messaging that prices may not fall much more and that Mosaic will not produce potash just for the sake of production,” Jackson said.
Short-term glut
Mosaic president and CEO, Joc O’Rourke, noted the company’s decision reflected near-term dynamics and not long-term agricultural market fundamentals.
“After a year of reduced applications, we believe farmers are incentivized to maximize yields, which should drive significant recovery in fertilizer demand in 2023,” O’Rourke said.
This is why underground development work at Colonsay will continue in anticipation of the restart of both mills in early 2023, he added.
Fertilizer prices have slumped from record levels reached following Russia’s invasion of Ukraine. This has driven farmers worldwide to ease back on buying, in some case choosing to skip a year of potash application or to use less fertilizer. That’s left a glut in the market, with some cargoes being redirected to the US from Brazil.
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