By Rod Nickel and Ashutosh Pandey
Dec 3 Potash Corp of Saskatchewan Inc
, the world's biggest fertilizer company, will slash its
workforce by 18 percent as it struggles with slumping demand and
weak prices for the crop nutrient.
The cuts will amount to more than 1,000 jobs in Canada, the
United States and Trinidad, including about 570 positions in its
potash operations, the company said on Tuesday.
"The need to become more globally competitive is what's
behind all of these workforce reductions," Chief Executive Bill
Doyle told Reuters in an interview.
"Our belief in the fundamentals of the business has not
changed at all. This is simply an adjustment to the current and
foreseeable market conditions."
Potash Corp has often acted as the swing producer in the
global market, trimming production and putting workers on
furlough when demand is weak. The severity of the permanent job
cuts, especially in its core potash operations, indicates it is
girding for a long-term slump in the potash market.
Potash Corp shares edged up 0.3 percent to $31.82 in
premarket trading in New York.
Doyle said Potash Corp will not cut its dividend, which was
raised in May, and has no immediate plans to scale down a share
buyback program. The company also intends to complete the
10-year, $8-billion expansion of its Canadian potash mines,
slated to wrap up in the next year.
Potash Corp reported its weakest quarter in three years in
October and cut its full-year earnings forecast more than
Potash prices have been sliding since mid-summer, when the
biggest global producer, Russia's Uralkali OAO, quit
its export partnership with Belaruskali of Belarus and said it
would seek to maximize sales volume.
Doyle said he had "no idea" when or if Uralkali and
Belaruskali will return to a strategy targeting higher prices
and reverse what he has called "the single dumbest thing" he has
The turmoil in the usually tightly controlled potash
industry, dominated by Uralkali and North America's Canpotex Ltd
export group, has caused buyers to head for the sidelines to
await further price reductions.
"While the (job cuts) announcement blames soft demand in
developing markets, we believe the real culprit is the BPC
(Uralkali-Belaruskali) break-up and the resulting price declines
in both (phosphate and potash)," BGC analyst Mark Gulley said in
a note to clients.
Potash demand was weak even before last summer's spat
between Uralkali and Belaruskali; buying from key importers
India and China has been particularly sluggish.
Typically, potash demand grows 3 percent annually, but it
has been flat since 2007 due to the recession, Doyle said.
He said Indian demand, influenced by government subsidies on
fertilizer, is unlikely to improve much until after Indian
elections this spring.
He said spot Chinese purchases should resume this month. A
contract between Canpotex - the export arm of Potash Corp,
Mosaic Co and Agrium Inc - and China's Sinofert
Holdings Ltd will likely be reached by the end of
January, he said.
Potash Corp said on Tuesday it would suspend production at
one of its two mills in Lanigan by year-end and cut production
at its Cory operations. Both operations are in Saskatchewan. It
also plans to stop production at its Penobsquis facility in New
Brunswick at the end of the 2014 first quarter.
Doyle said the company will still have the ability to supply
buyers with more than 10 million tonnes of potash in 2014,
combining production with its large stockpiles.
He could not predict how much potash the company will
produce in 2014. But he said 2013 production is likely to amount
to around 7.75 million tonnes, a little over half of the
company's capacity, reflecting output curbs.
"We'll sell exactly what we were going to sell anyway,"
without the job cuts, Doyle said. "This doesn't affect in any
way our ability to service our customers.
"We just had too much capacity versus what we were seeing
needed in the foreseeable future."
North American potash stockpiles at the mine level reached
2.8 million tonnes in October, 39 percent above the average of
the previous five years, according to data on Potash Corp's
Doyle said Potash Corp remains interested in raising its
equity stakes in Israel Chemicals Ltd, Chilean potash
and iodine producer SQM, Arab Potash Co and
Sinofert. Despite the difficult conditions, it is not looking to
sell those investments, he said.
The job cuts also extend to the company's phosphate and
It will close its Suwannee River chemical plant, one of two
at its White Springs phosphate facility in Florida, in the
second half of 2014.
Potash Corp said it expects potash cost savings of $15 to
$20 per tonne in 2014 from the job cuts and operation closures,
with a targeted reduction of $20 to $30 per tonne by 2016.
The company's potash sales fell to 1.5 million tonnes in the
third quarter from 2.1 million tonnes a year earlier, while its
average realized price dropped 28 percent to $307 per tonne.
The company will take a one-time charge of about $70 million
related to the job cuts.