The mine in Saskatchewan has stopped producing potash after weaker demand has resulted in lower fertilizer prices across North America, according to a report by the Bloomberg- Mosaic Co.
The Colonsay site has been operating at 1.3 million tonnes per year, with plans to expand to as much as 2 million tons by the end of next year, the company said. It was restarted in August 2021 after being idled for two years due to the slumping demand.
After Russia invaded Ukraine, Fertilizer prices fell to record levels. In some cases farmers from Brazil to Canada have resisted buying, and in some cases chose to skip a year of potash application or use less fertilizer in the face of high prices. The statement shows that Mosaic s inventory levels are sufficient to meet near-term demand, with demand returning slower than expected in the second half of 2022. The company said that the development work will continue in anticipation of the restart of both mills in early 2023.
According to Bloomberg's fertilizer publication Green Markets, the potash in Brazil has fallen by more than half since hitting a high of $1,200 per metric ton earlier this year. The latest weekly prices fell nearly 3% on Nov. 2 to $515 per metric ton.
Mosaic and Nutrien Ltd. see a strong market ahead. Last week, Nutrien Chief Executive Officer Ken Seitz warned of looming shortages in the coming years, with supplies from Russia and Belarus constrained. Nutrien plans to increase its capacity by 40% by the year 2025.
The decision to temporarily curtail Colonsay reflects near-term dynamics and not long-term agricultural market fundamentals. Mosaic s President and CEO Joc O Rourke said that crop prices are strong and continue to support healthy grower economics. After a year of reduced applications, we believe farmers are encouraged to maximize yields, which should lead to a significant recovery in demand for fertilizer in 2023. In a note, Alexis Maxwell, a Bloomberg Intelligence analyst, said that cutting production could reduce Mosaic's first quarter 2023 potash sales by 325,000 metric tons and cost the company $140 million in revenue.
She said that she was surprised by the fact that curtailment came as a big surprise. The market was expecting to see a year of reduced supply with Belarus out of the market due to western sanctions. In a note, Ben Isaacson, Scotiabank analyst, said the move could help the market in the long term.
Isaacson said that unless Nutrien sees different data, we think the company would benefit by proportionately matching Mosaic s move, not to mention its shareholders and the industry as a whole, Isaacson said. Nutrien has a free call option on tightening the potash market into the spring because of Mosaic taking the lead. None Twitter Under Elon Musk Still Has to Live in Apple's World