Canada's Nutrien eyes potash production boost amid turmoil in Russia, Belarus

Gensource Potash

01/02/2022 06:00

By Rod Nickel and Polina Devitt
    WINNIPEG, Manitoba, Feb 1 (Reuters) - Nutrien Ltd  NTR.TO ,
the world's biggest potash miner, could boost production by up
to 29% in coming years, depending on any sanctions facing rival
producers in Russia and Belarus, the Canadian company's interim
CEO told Reuters.
    Prices of granular potash fertilizer are near 10-year highs
in the United States and Brazil, helped by Western economic
sanctions against Belarus https://www.reuters.com/markets/commodities/potash-importers-brace-prolonged-price-rally-after-sanctions-belarus-2021-12-21.
 Russia, home of Uralkali and EuroChem potash mines, faces
possible economic sanctions https://www.reuters.com/world/europe/us-seeks-protect-europes-energy-supplies-if-russia-invades-ukraine-2022-01-25
 if it invades Ukraine. 
    Uralkali and Belarus Potash Company (BPC) together account
for more than one-third of global potash sales, according to BMO
Capital Markets.
    Soaring fertilizer prices have cut in to farmers' incomes
and contributed to global food inflation. Additional potash
production may slow rising costs.
    Saskatoon, Saskatchewan-based Nutrien could restart up to 4
million tonnes of idled annual capacity in that Canadian
province in coming years as it assesses the long-term outlook
for sanctions against competitors, interim Chief Executive Ken
Seitz said in his first interview since his promotion https://www.reuters.com/article/nutrien-ceo-idCNL4N2TK2CN
 in January.
    "If these are short-lived events, we don't want to spend all
kinds of money staffing and opening up ground," he said. "If
this is going to be a longer-term problem for the market, we
will absolutely do that. 
    "We will absolutely step into that void."
    A Russian troop buildup near Ukraine has stoked fears https://www.reuters.com/world/europe/russia-fails-keep-un-security-council-debate-ukraine-closed-2022-01-31
 of war. The United States and United Kingdom are prepared to
punish Russian elites close to President Vladimir Putin with
asset freezes and travel bans if Russia sends troops into
Ukraine, the White House and British government said on Monday.
 urn:newsml:reuters.com:*:nL8N2UB4XT 
    As a first step in raising production, Nutrien may raise
output by 700,000 to 1 million tonnes in the second half of 2022
at low expense, Seitz said, reiterating comments he made last
year. Nutrien currently produces nearly 14 million tonnes,
representing 19% of global sales.
    Seitz could not say how soon Nutrien might restart the
remainder of Nutrien's idled capacity, which would involve more
work.
    Nutrien has had no talks, Seitz said, in his short time at
the helm about any form of potash partnership with BHP Group
 BHPB.L , which is building a Canadian mine.
    Canpotex Ltd, the export company owned by Nutrien and Mosaic
Co  MOS.N , is fully committed for sales through March 31,
illustrating strong demand for Canadian potash.
    Global operational capacity, however, exceeds demand by over
10 million tonnes this year, according to BMO Capital Markets. 
    "In a normal situation, the potash market is oversupplied,"
said BMO analyst Joel Jackson. "If I was Nutrien, I would
probably hold back on my decision to expand too much too fast."
    Additional production from competitors will not fully
replace BPC, which previously sold about 12.5 million tonnes a
year, said Elena Sakhnova, an analyst at VTB Capital. 
    The board of Lithuanian Railways on Monday voted to stop
transporting Belarus' potash, isolating it from a key port.
 urn:newsml:reuters.com:*:nL1N2UB1CR
    Russian producers are unlikely to rush to increase their
output because of speculation that Washington may grant a waiver
to BPC's U.S. buyers, essentially postponing sanctions from
taking effect on April 1, Sakhnova said.
    A EuroChem spokesperson said the company has no plans to
accelerate ramp-up of its new production. Uralkali declined to
comment.
    Unlike the last time potash prices were this high over a
decade ago, there are few advanced junior projects to add
production. Construction of a small, 250,000-tonne Gensource
Potash  GSP.V  facility could start in Canada this summer, with
first output in 2024.
    For larger producers, adding additional tonnes is not as
inexpensive or simple as they say, Gensource CEO Mike Ferguson
said.
    "They are so used to just controlling things in the industry
and have started to believe their own marketing about having
excess capacity," Ferguson said.

 (Reporting by Rod Nickel in Winnipeg and Polina Devitt in
Moscow
Editing by Matthew Lewis)
 ((rod.nickel@tr.com; Twitter: @RodNickel_Rtrs;
1-204-230-6043;))