BHP has been considering such a move ever since prices spiked a decade ago. Construction of its Jansen mine in Saskatchewan, Canada – which could become the world’s largest – has been progressing at a slow pace for years; BHP has yet to commit the capital needed for completion because of soft prices.
Should BHP decide to enter, it would create unprecedented competition in Canada, where a marketing arrangement has so far allowed Nutrien and Mosaic Co. to dominate. The two companies own Canpotex, a company that handles sales and transportation outside North America and owns thousands of rail cars and has access to four port terminals.
Fresh supply would also threaten a recovery for potash driven by steadily growing global demand, Nutrien’s curtailments and a slow ramp-up at new mines owned by K+S AG and EuroChem.
Nutrien plans to wield its 8.1 million t of unused capacity to protect its position, in a switch from its previous strategy of using curtailments to lift prices even at the cost of market share.
Chief Executive Chuck Magro, asked whether Nutrien intends to balance its desire for higher prices with an effort to keep competitors out, said “that’s exactly the way we think about it.”
Nutrien’s idled production represents 11% of current global operational capacity and will be deployed once prices approach levels that would encourage new mines, he said.
“There will be a price in the global market, that once we get there, you will see Nutrien put more tonnes into the market because the demand is there. We will not be shy,” Magro told Reuters. Prices are well below such a level, he said, declining to identify it. Granular potash sells for an average US$331/t in Brazil, as of 17 August, up 25% y/y, according to Mosaic data.
Bernstein analyst, Jonas Oxgaard, believes that BHP will need prices in Brazil to be approximately US$400/t to realise a reasonable return on the Jansen mine. BHP reports annual results today, and investors will look for any improved sentiment towards potash, given rising prices.
BHP has approved US$3.9 billion in spending on the Jansen mine, allowing it to sink mine shafts. That work may last up to two years, and building the first 4 million t stage of the mine is expected to require a further US$4.7 billion that BHP’s board may consider next year.
Three more stages of equal size are longer-term options, taking the mine to 16 million t, or more than double the world’s current largest potash mine.
Read the article online at: https://www.worldfertilizer.com/potash/21082018/nutrien-ready-to-release-idle-potash-capacity-if-bhp-attempts-entry/