A possible potash miners’ strike now looms over PotashCorp as the Saskatchewan fertilizer firm posts its highest quarterly earnings ever.
Saskatoon-based Potash Corporation of Saskatchewan on Thursday racked up net income of $905.1 million (all figures US$) on $2.62 billion in sales in the second quarter (Q2) ending June 30, up from $285.7 million on $1.35 billion in the year-earlier period — and up from its previous record 2008 Q1 of $566 million on $1.89 billion.
Unsurprisingly, the company said the results reflect “rising global fertilizer demand and the impact of significantly higher prices for potash, nitrogen and phosphate products.” “We are experiencing strong growth in demand and are capturing the value of higher prices in all three nutrients, especially in potash,” CEO Bill Doyle said in the company’s press release. “With farmers around the world striving to maximize yields and placing a priority on fertilization, this quarter provided a glimpse of the future potential of our company.”
Global potash inventories, the company said, have dropped to “historically low levels around the world.” Reported North American producer inventories were 41 per cent below the previous five-year average at the end of June, which the company said was an “extremely low level given upcoming summer maintenance shutdowns.
“Global demand remains unsatisfied, even without considering the protracted contract settlements that left China approximately three million tonnes short of previously expected 2008 potash requirements.”
Worldwide nitrogen and phosphate supplies, meanwhile, were impacted in Q2 by China, the world’s largest urea exporter and second-largest phosphate exporter in 2007, introducing a 35 per cent tax on phosphate and nitrogen exports during Q1 to protect its domestic supply, and then raising it to 135 per cent effective from April 20 to Sept. 30, 2008.
“While higher global costs for oil and natural gas supported higher product prices and generally restricted product movement to regions relatively close to the source of production, the Chinese export tax immediately and significantly drove world urea prices higher,” the company wrote. “Phosphate producers without an integrated supply of phosphate rock continued to be affected by rising costs for key inputs.”
Meanwhile, the company said Thursday, unionized employees at its Cory, Allan and Patience Lake potash mines in Saskatchewan expired on April 30 and the workers voted Monday to authorize strike action.
The bargaining units on Wednesday served the company with a strike notice, which allows them to strike anytime following the 48-hour period after the notice was served, PotashCorp said.
In response, the company said it has served those units with a lockout notice that allows PotashCorp to lock out the miners 48 hours after its own notice was served.
“While we cannot predict the likelihood, form or timing of any work stoppage at these locations, we believe we have appropriate contingency plans in place,” the company wrote.