US fertilizer producer Mosaic (NYSE: MOS) has quickly lower manufacturing at its Colonsay potash mine in Saskatchewan, Canada, as a result of slower-than-expected demand.
Previous to the curtailment, Colonsay had been working at a yearly run charge of 1.3 million tonnes and Mosaic had plans to develop output to between 1.8 million and a pair of million tonnes by late 2023.
The corporate’s transfer contrasts with the place of different potash corporations, together with Canada’s Nutrien (TSX: NTR; NYSE: NTR), the world’s largest producer of the fertilizer ingredient.
The Saskatoon, Saskatchewan-based agency and different North American potash miners ramped-up manufacturing after Russia’s invasion of Ukraine in February this yr.
Nutrien mentioned in November it deliberate to enhance potash manufacturing capability to 18 million tonnes by 2025, representing a 40% enhance from 2020 ranges.
The corporate believes the market will proceed to face international shortages as provides from Russia and Belarus have gotten extra restricted than anticipated.
About 60% of latest manufacturing that was anticipated to return into the market over the following 5 years was in Russia and Belarus. At the moment, it’s unclear how a lot of that can come on-line.
BHP (ASX: BHP) determined in July to hurry up development at its US$5.7 billion Jansen potash mine in Canada.
The world’s largest miner had initially deliberate to kick off manufacturing at Jansen in 2027, nevertheless it now goals to deliver on-line the primary section of 4 improvement levels a yr earlier.
Mosaic, nevertheless, says it has sufficient stock to fulfill demand within the brief time period.
The Colonsay potash mine reopened in June final yr, after being quickly closed in August 2019 and indefinitely in January 2020.
Joel Jackson, mining equities analyst at BMO Capital Markets, mentioned the introduced manufacturing lower at Colonsay stands out as the subsequent step in a potash bottoming course of.
“We’ve been ready for a curtailment announcement since September as a recreation of hen has developed between suppliers and buyers-growers,” he wrote.
“Traditionally, Nutrien or Mosaic asserting curtailments was sometimes a constructive improvement for worth, although ultimately, Mosaic may merely be slowing down Colonsay for a small variety of weeks that features the vacation break, so this might merely be on this recreation of hen some messaging that costs might not fall far more and that Mosaic is not going to produce potash only for the sake of manufacturing,” Jackson mentioned.
Quick-term glut
Mosaic President and CEO, Joc O’Rourke, famous the corporate’s resolution mirrored near-term dynamics and never long-term agricultural market fundamentals.
“After a yr of diminished functions, we imagine farmers are incentivized to maximise yields, which ought to drive important restoration in fertilizer demand in 2023,” O’Rourke mentioned.
That is why underground improvement work at Colonsay will proceed in anticipation of the restart of each mills in early 2023, he added.
Fertilizer costs have slumped from document ranges reached following Russia’s invasion of Ukraine. This has pushed farmers worldwide to ease again on shopping for, in some instances selecting to skip a yr of potash utility or to make use of much less fertilizer. That’s left a glut available on the market, with some cargoes being redirected to the U.S. from Brazil.
