Yara estimates that it buys 10-15 per cent of the annual output of state-owned Belaruskali, one of the world’s largest producers of potassium salt, or potash, the crop nutrient that is a major foreign currency earner for Belarus.

The company said its purchase of potash from Belarus had been in full compliance with the sanctions but would still have to come to a halt.

“Other parts of the supply chain are withdrawing essential services required to enable potash exports from Belarus, as a result of which Yara has initiated a wind-down in sourcing activities,” the company said in a statement.

This included logistical and financial services companies, even where such services could be lawfully provided, a Yara spokesperson added.

“It is these practical challenges stemming from the sanctions, that have required us to evaluate alternative sources of supply,” the spokesperson said.

Western powers accuse Belarus’ President Alexander Lukashenko of rigging a 2020 presidential election and have piled sanctions on his regime, including restrictions on potash exports.

Exiled opposition leader Sviatlana Tsikhanouskaya has repeatedly called on Yara to suspend its activity in Belarus, and the company said in August it would consider the request.

Yara sources potash from nine suppliers globally, including Canada’s Canpotex and Germany’s K+S, according to a company sustainability report filed last year. Canpotex is the export arm for fertilizer companies Nutrien and Mosaic, which along with K+S operate potash mines in Saskatchewan.

“As part of our risk management work we continue to map alternative supply options to be able to respond to supply chain disruptions,” the company spokesperson said.

Beleruskali was Yara’s single biggest potash supplier, the spokesperson added.

Yara buys its potash from Belarus Potash Co. (BPC), Belaruskali’s sales arm. The Norwegian firm said it will seek to continue an industrial safety programme launched last year in cooperation with trade union representatives.

BPC did not immediately reply to a Reuters request for comment.

Global potash prices are set to rally after the U.S. imposed sanctions on BPC, piling more pressure on farmers and consumers already facing rocketing costs and a global economy navigating rising food inflation, analysts and industry sources told Reuters in December.

— Reporting for Reuters by Terje Solsvik and Victoria Klesty in Oslo; additional reporting by Polina Devitt in Moscow.

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Nutrien said in a statement it named Ken Seitz, the head of its potash business, as interim chief executive after Mayo Schmidt stepped down as CEO. The company gave no reason for Schmidt’s departure and spokesperson Megan Fielding said there are “legal constraints” on what Nutrien can say about it.

Fielding said the leadership change will not affect Nutrien’s strategy.

“It’s mighty perplexing to me,” said Brian Madden, senior vice-president at Goodreid Investment Counsel, a Nutrien shareholder. “Feels like lightning striking twice in the same place to see two peculiar, abrupt transitions within a year.”

Soaring prices of potash fertilizer, due to rising demand and supply problems for Nutrien competitors, have put a charge into the company’s profits. Its third-quarter net income was the highest for that period in the company’s four-year history, since forming from Agrium’s acquisition of PotashCorp.

Under Schmidt and Seitz, Nutrien boosted potash sales and was examining restarting idled mine capacity to raise production further to capitalize on high prices.

Nutrien’s U.S.-listed shares dropped 3.8 per cent. The change raised investor questions about senior leadership dysfunction and strategy at the company, said Scotiabank analyst Ben Isaacson.

Nutrien’s board is chaired by Russ Girling, a former CEO at pipeline company TC Energy, and also includes former Barrick Gold CEO Aaron Regent.

Schmidt, Nutrien’s former chairman, took the CEO job in April, replacing Chuck Magro. Schmidt, whose resume also includes stints as CEO at grain firm Viterra and Ontario power utility Hydro One, did not respond to requests for comment.

Seitz joined Nutrien as executive vice-president in charge of potash operations in 2019. He previously led Canpotex, a potash export company owned by Nutrien and Mosaic Co.

Girling, in Nutrien’s release, said the board will now “begin a global search to select a long-term leader that will take the company into its next phase, which will consider internal and external candidates.”

— Reporting for Reuters by Rithika Krishna in Bangalore and Rod Nickel in Winnipeg.

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Now the trick will be keeping prices from appreciating too much to ensure a major would-be competitor, BHP Billiton, stays on the sidelines.

BHP has been weighing an entry into potash since prices spiked a decade ago. Construction of its Jansen mine in Saskatchewan — which could become the world’s largest — has been advancing slowly for years, but BHP has held off on committing the capital needed for completion, because of soft prices.

A BHP entry would create stiff competition in Canada, where a marketing arrangement allows Nutrien and Mosaic Co. to dominate.

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 tonnes 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.

CEO 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 per cent 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 $331 per tonne in Brazil, as of Aug. 17, up 25 per cent year over year, according to Mosaic data (all figures US$).

BHP likely needs prices in Brazil of around $400 per tonne to realize a reasonable return on the Jansen mine, said Bernstein analyst Jonas Oxgaard. Nutrien will need to keep prices below that level to avoid “waving a red flag in front of the BHP bull,” he said.

BHP reports annual results on Tuesday, and investors will look for any improved sentiment toward potash, given rising prices.

A spokeswoman said BHP takes a long-term view of commodities and investment decisions are not based on short-term prices.

BHP has approved $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 four million-tonne stage of the mine is expected to require a further $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 tonnes, or more than double the world’s current largest potash mine.

Nutrien maximizes its leverage through Canpotex, a company it owns with Mosaic that handles transportation and sales outside North America.

Canpotex’s ownership of thousands of rail cars and access to four port terminals give it a logistical advantage, raising the challenge for K+S, the only other Canadian potash miner, to compete.

But BHP, one of the biggest global sellers of iron ore, copper and coal, has a global supply chain, low-cost production and a reputation for focusing on market share over price, positioning it to mount the fiercest competition Canpotex has ever seen in its own backyard.

“It’s already a highly competitive space,” said Canpotex CEO Ken Seitz. “The fact that (BHP) would be coming out of Saskatchewan, I don’t see that as threatening Canpotex.”

Canpotex expects to set a sales record this year of around 13 million tonnes, and has sold out of supplies through October.

Demand from Brazil and China continues to grow, pushing global sales to an expected 66 million-67 million tonnes this year, Seitz said.

— Reporting for Reuters by Rod Nickel in Winnipeg and Barbara Lewis in London.

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“We’re not interested in some kind of ratcheting down. That is for sure,” CEO Ken Seitz told Reuters in a telephone interview from Saskatoon, where Canpotex, owned by miners PotashCorp, Mosaic Co. and Agrium, is based.

Global potash prices remain weak due to excessive capacity and sagging farm incomes but a modest price rebound since late last year and lower year-over-year Chinese potash inventories suggest buyers there should pay more, Seitz said.

Canpotex sells potash produced by the companies in Saskatchewan to offshore markets.

“If you look at the global market compared to a year ago, it’s much improved,” said Seitz, a former uranium mining executive. The price gains and supply cuts by some producers “allow us to have an expectation for a material price increase in China,” he said.

He declined to clarify what price increase Canpotex is seeking.

In an April 4 note, BMO analyst Joel Jackson factored in $5 per tonne price increases from Chinese and Indian buyers, to $224 and $232 per tonne respectively.

Those prices would fall “well below” Canpotex’s expectations, Seitz said, but he added that ultimately the price is set by rivals who agree to terms first with Chinese purchasers Sinofert Holdings and CNAMPGC.

Contracts with China by global suppliers Canpotex, Belaruskali and Uralkali usually set a global price floor.

Canpotex, whose owners account for about one-third of global potash sales, is not prepared to cede market share to rivals starting new mines, Seitz said.

German’s K+S AG will open a Saskatchewan mine this year, while EuroChem is building two Russian mines. Turkmenistan opened a potash plant last month.

Canpotex companies Potash and Mosaic, meanwhile, have made production cuts even as they expand their biggest mines.

“We believe we can maintain our market share and not have to sacrifice a bunch of price,” Seitz said, noting that some competitors have higher costs.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.

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The two Canadian fertilizer producers agreed to merge last September to navigate a severe industry slump by boosting efficiency and cutting costs.

Neither Agrium nor PotashCorp have physical presence in India, but both supply potash to India through Canpotex, their joint export venture with Mosaic Co.

“The commission is of the prima facie opinion that the proposed combination is likely to have an appreciable adverse effect on competition,” the Competition Commission of India said.

The regulator has sought public opinion on the deal and has directed the two firms to publish details of the proposed merger, the statement said.

The commission made similar comments a week ago about the proposed combination of chemical producers Dow Chemical and DuPont.

The Indian commission has now begun the second phase of its review process, similar to the process under way in the U.S., Canada and China, said PotashCorp spokesman Randy Burton.

“It is premature and inappropriate to speculate on whether any reviewing agency will object to the transaction or seek to impose conditions,” he said.

The commission’s comments are of little consequence to the Potash-Agrium merger because the companies do not own assets in India, said Bernstein analyst Jonas Oxgaard.

“The only regulators that really matter in this (are) Canada and the U.S., and neither of them have objections as near as we can tell,” he said.

— Reporting for Reuters by Sudarshan Varadhan in New Delhi and Rod Nickel in Winnipeg.

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A February report recommended that Ottawa institutes transportation system changes, including phasing out a 16-year-old cap on revenue that Canadian National Railway and Canadian Pacific Railway (CN, CP) earn hauling western grain.

Transport Minister Marc Garneau has spent months meeting shippers and railways, and has a last meeting on Thursday (Oct. 20) with farmers. He will announce decisions this autumn, spokesman Marc Roy said.

Railways struggled to move the huge 2013 harvest during a harsh winter, angering farmers. The former Conservative government imposed grain volume minimums and expanded interswitching, the transfer of cars from one railway’s line to another’s.

Expanded interswitching remains, while Ottawa removed monthly grain minimums but kept the authority to impose them again.

Railways say the measures, including the revenue cap, distort markets and offer less reason to invest.

“We can buy more modern cars, larger capacity cars if we let the commercial process work,” CP chief operating officer Keith Creel said in an interview. “Mistrust between the railway and the farmer is going to have to be healed for that to happen.”

CP asked Ottawa to scrap the cap and eliminate expanded interswitching, which allows U.S.-based BNSF Railway to take certain Canadian shipments without adequately compensating railways for using their railroad, Creel said.

BNSF declined to comment on compensation. The railway has not made requests to Ottawa regarding interswitching, said spokesman Mike Trevino.

CN wants Ottawa to move away from regulated grain volumes, expanded interswitching and the cap, said spokeswoman Kate Fenske.

Farmers fear they won’t get fair treatment without the cap, since nearly all 400 Western Canada crop facilities are served by a single railway.

“There isn’t competition in the system,” said Ron Bonnett, president of the Canadian Federation of Agriculture.

Grain companies want Ottawa to preserve interswitching, which introduced needed competition, said Wade Sobkowich, executive director of the Western Grain Elevator Association, whose members include Richardson International and Viterra .

Canpotex, the offshore potash exporter for PotashCorp, Mosaic Co. and Agrium, wants equal treatment of commodities, and no reinstatement of grain minimums, said CEO Ken Seitz.

“We don’t want the government to pick winners and losers,” said Brendan Marshall, vice-president of economic affairs at Mining Association of Canada, which includes Teck Resources Ltd.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.

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Saskatoon-based PotashCorp and Calgary’s Agrium confirmed Tuesday they were in preliminary merger talks, toward a deal that would create a fertilizer and farm-retailing giant.

Canada is likely to look more favourably on the combination because its regulators more strongly weigh the potential for achieving efficiencies such as reducing overhead and optimizing shipping. This position has its roots in a desire by policymakers to strengthen companies operating in Canada’s smaller market.

“The efficiencies defense will certainly loom large,” said Nikiforos Iatrou, competition group chair at law firm WeirFoulds in Toronto.

“It’s possible that in this case the efficiencies win the day in Canada but don’t carry the day in the United States.”

The defense was highlighted this year, when the Canadian Competition Bureau approved a deal between Superior Plus Corp. and Canexus Corp., saying that efficiency gains would be greater than the anti-competitive effects.

The U.S. Federal Trade Commission blocked the same deal, which was then scrapped.

U.S. to focus on product pricing

PotashCorp and Agrium have significant operations in the U.S., which would spur review by the Federal Trade Commission or the Justice Department.

U.S. regulators would focus primarily on prospects for the deal to raise prices for the companies’ fertilizer products, which account for as much as one-third of input costs for U.S. corn farmers.

A combined PotashCorp and Agrium would control 62 per cent of potash capacity in North America, 30 per cent of phosphate production capability and 29 per cent of nitrogen capacity, according to National Bank Financial.

Both U.S. regulators have taken an aggressive stance on mergers, said Andrea Murino, co-chair of competition at law firm Goodwin Procter in Washington.

“Just based on the market shares, the deal is going to get some really close scrutiny,” she said.

The prospect of having only two big U.S. potash sellers, down from three, might worry antitrust enforcers, said Ethan Glass, a U.S. Justice Department veteran now at Quinn, Emanuel Urquhart + Sullivan in Washington.

The merged company could sell Agrium’s potash mine at Vanscoy in west-central Saskatchewan to ease those worries, he said.

Agrium-PotashCorp’s clout could also be diluted by other developments with rival miners Mosaic Co. and K+S AG planning to add capacity in North America.

Under the Canadian review, PotashCorp and Agrium could argue their merger would enable the Canadian company to be a stronger global player.

“This idea of creating a ‘national champion’ pops up from time to time — and the federal government is often pressured to consider measures that would be supportive of this,” said Subrata Bhattacharjee, vice-chair of competition for law firm BLG in Toronto.

The deal may also catch the attention of regulators in China, a major potash buyer. Agrium, PotashCorp and Mosaic sell potash offshore through jointly-owned Canpotex.

Huy Do of law firm Fasken Martineau in Toronto said Chinese regulators may see the deal as an opportunity to dismantle Canpotex.

— Reporting for Reuters by John Tilak in Toronto, Rod Nickel in Winnipeg, Diane Bartz in Washington, D.C. and Michelle Price in Hong Kong.

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Calgary-based Agrium and Saskatoon-based PotashCorp emphasized in separate statements Tuesday that no decision has yet been made on whether to go ahead with such a merger and no agreement has yet been reached.

“There can be no assurance that any transaction will result from these discussions,” both companies said in their statements.

PotashCorp has an estimated market capitalization of about $19 billion, compared to fertilizer and ag retail player Agrium at about $17.2 billion, according to the Bloomberg news service, which first reported the merger talks early Tuesday.

Saskatchewan Premier Brad Wall said Tuesday he spoke to both companies’ CEOs that morning and both indicated “the interests of Saskatchewan have been at the forefront of even these preliminary discussions,” citing jobs and tax revenue both companies provide in the province.

Agrium, which entered the crop nutrient game as Cominco Fertilizers in 1931, has expanded in both the fertilizer and farm retail space since then, taking over Crop Production Services (CPS) in 1994, United Agri Products (UAP) in 2008 and Viterra’s ag retail business in 2013.

PotashCorp, a former Saskatchewan Crown corporation, was privatized in 1989 and through acquisitions since then has become the world’s biggest potash producer by capacity and one of the largest producers of nitrogen and phosphate.

Both firms’ fertilizer businesses are seen to be at the low end of the market cycle, however, on dwindling fertilizer prices, burdensome supplies and weaker currencies among fertilizer-importing countries.

PotashCorp, for one, recently shut its potash mines in New Brunswick and slowed production at two of its mines in Saskatchewan, citing weak market conditions and excessive supply.

The company also underwent a round of layoffs, plant closures and production slowdowns in 2013, in the wake of the exit of Russian potash miner Uralkali from Belarusian Potash Co. (BPC), its joint venture with partner Belaruskali, creating another significant drag on potash prices.

BPC was one of the world’s two top potash marketing cartels, alongside Canpotex — the joint potash export arm of PotashCorp, Agrium and Mosaic Co., all of which operate mines in Saskatchewan.

Fertilizer industry consolidation has since been brewing. PotashCorp last fall abandoned a takeover bid for German potash firm K+S, which is also building a Saskatchewan mine.

PotashCorp in 2010 also fended off a hostile bid from British/Australian mining firm BHP Billiton — which has also staked a potash claim in Saskatchewan.

Wall, whose government opposed Billiton’s bid for PotashCorp, noted Tuesday that there’s no formal process for the province to make its views known in a merger of two Canadian companies. A foreign takeover, by comparison, requires approvals from Canadian federal regulators and lawmakers.

However, he said, as the host province for PotashCorp’s head office and potash mines and several Agrium operations, “we would absolutely have an interest at stake” in such a merger and would have an obligation to protect such interests.

There may be an opportunity for Saskatchewan to pursue further business development with a merged PotashCorp/Agrium, he added.

Agrium, which in 2013 fended off investor pressure to split its wholesale fertilizer business and ag retail arm, said earlier this year it may see opportunities to buy into proprietary crop genetics or ag chemicals, in view of planned consolidations in the seed and ag chem sectors.

Minnesota-based Mosaic separately noted earlier this month there may be opportunities to pick up underperforming potash and phosphate assets from diversified mining firms. Mosaic last month also idled its Colonsay, Sask. potash mine for the rest of this year. — AGCanada.com Network

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Canpotex said the decision was based on economic and commercial considerations and that its export capacity in Vancouver, Saint John and Portland were sufficient.

PotashCorp CEO Jochen Tilk had said in January that the suspension of production at a New Brunswick potash mine could lead Canpotex to shelve plans to build the terminal.

Saskatoon-based Canpotex had announced its plans for a new “greenfield” bulk terminal at Prince Rupert’s Ridley Island in 2008, with capacity to handle 13 million tonnes per year.

The company later signed a lease agreement with the Prince Rupert Port Authority and secured the required environmental permits.

It said last year its final investment decision would be “based on commercial factors, including construction costs and offshore potash market projections.”

Prince Rupert, near the southernmost tip of Alaska and about 750 km northwest of Vancouver, has intermodal container, cruise and bulk export terminals and handles commodities including coal, grain and forestry products.

— Reporting for Reuters by Vishaka George in Bangalore. Includes files from AGCanada.com Network staff.

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Canpotex Ltd., owned by the three companies, has been considering construction of the terminal at Prince Rupert, B.C.

Saskatoon-based PotashCorp said Tuesday it would shut its newest mine, Picadilly, near Sussex, N.B., due to weak market conditions.

The company also said its port storage and loading facilities at Saint John, N.B., with capacity of handling 2.5 million tonnes annually, could now be used by Canpotex.

Canpotex exports potash that PotashCorp, Mosaic and Agrium produce in Saskatchewan.

The decision allows Canpotex to “indefinitely defer” a decision on the $900 million Prince Rupert terminal, PotashCorp’s Tilk said at a CIBC investor conference in Whistler, B.C.

“We certainly don’t anticipate making that decision in the next 10 years, so we’re very good with our port facilities on the West Coast and on the East Coast,” he said.

PotashCorp spokeswoman Denita Stann said after Tilk’s comments that he was speaking about options available to Canpotex and that it had not concluded any decision.

Canpotex could not be immediately reached.

Tilk also said PotashCorp’s board of directors would discuss the company’s dividend next week. Analysts have speculated PotashCorp will reduce its dividend.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.

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