PotashCorp sees slump in phosphate market
Published 6:23 pm Tuesday, January 31, 2017
PotashCorp’s 2016 fourth-quarter earnings came in well below the comparative earnings in 2015, according to the company’s yearend financial report.
The markets for all three of PotashCorp’s nutrient products, which include potash, nitrogen and phosphate, experienced weak prices in 2016, leading to lower profit margins, a press release stated. PotashCorp’s phosphate mine operation in Aurora employees more than 800 people in Beaufort County.
As PotashCorp’s merger with agricultural product company Agrium Inc. continues, officials will take a closer look at assets and the profit they generate, particularly those related to phosphate, according to Jochen Tilk, chief executive officer of PotashCorp.
Tilk outlined the industry market surrounding phosphoric acid, of which phosphate is an indirect element, saying 60 percent of the phosphoric product is funneled to dry feed producers, while 40 percent is incorporated into liquid fertilizer.
According to Tilk, a slump in the liquid fertilizer market and competition in the dry feed market led to lower earnings in 2016.
“That’s what has given us an impact there,” he said.
Although market factors for potash have hinted at improvement in early 2017, PotashCorp officials expect there to be some “expected challenges” with regard to phosphate.
“In phosphate, we expect challenging market fundamentals to weigh on realizations for our products and profitability in this segment,” the release stated. “Given these considerations, we forecast combined nitrogen and phosphate gross margin will be in the range of $150-$400 million in 2017.”
Nitrogen and phosphate saw a $413 million combined gross margin in 2016.
The merger with Agrium is expected to be complete by mid-2017. Both companies are based in Canada.
Officials believe the merger will yield positive results, and as the two companies collaborate and mesh resources, more answers for phosphate operations may surface.
“In terms of strategic options, can’t really say much about it,” Tilk said. “We had always stated in the evolution of our discussions with Agrium that discussion started in phosphate, and it started of finding synergies and opportunities to work together, and we’re still hopeful that as we move along in the merger and it eventually gets consummated that there is an opportunity to really get these synergies in the phosphate area materializing.”