Thursday, January 28, 2010

Getting ready to rumble in the potash patch

BHP doesn't walk on water,” -- William Doyle the President and CEO of Canada's Potash Corporation, responding to the pending challenge of Australia's BHP Billiton's arrival on Saskatchewan soil.

Rupertites looking for signs of Canpotex's intentions towards our gateway to Asia may have to wait a fair bit longer, as financial disappointments and competing interests take up a good portion of the potash corporations time these days.

In fact for those seeking more details on the state of the industry these days, a quick trip to the business pages of the nations major papers provides us with a ring side seat for what is shaping up to be a pretty interesting bit of competition in the potash world.

As we outlined on the blog yesterday, BHP Billiton the international mega company has jumped into Saskatchewan with ambitious intentions, seeking to develop a project that could change the dynamic of the potash industry in the nation.

It's a move that today was greeted with a bit of derision by the current leader in potash in Canada the Potash Corporation, of which Canpotex is a major participant.

William Doyle, the President and CEO of Potash Corporation, outlined his thoughts on the arrival of BHP Billiton for the Globe and Mail on Thursday, suggesting that his company isn't feeling threatened, nor pressured by the arrival in it's backyard of the world's largest mining corporation.

Doyle provided the kind of quotes that end up on corporate bulletin boards, as he traced back some of the history of the fertilizer business and the Johnny-come-latelies that arrive on the scene and then depart from it as soon as the going gets tough.

“They ended up losing billions of dollars and they got out of the business just as fast as they got in. A study of this history might be a worthwhile exercise for companies with no fertilizer expertise”

“I am fully confident we will be able to compete against them, or anyone else who decides they might want to enter this space. No one should take us for granted. We can be very tough when we need to be.”

His observations continued on for the National Post, where he was left scratching his head at the sudden burst of economic interest by BHP Billiton, a company that Doyle believes is simply trying to drive down the price of potash in order to buy up rival companies. A theory that has been outlined before with rumours and now instances of a potential Billiton buying spree of major potash producers.

Doyle's tone seems to be setting the stage for a rather vigorous competitive round of development in Saskatchewan, with an impact that could be felt at British Columbia's ports perhaps even in Prince Rupert.

However, before they get to dropping the gloves, Potash Corporation has some internal problems of its own to tend to, the fourth quarter of 2009 provided more disappointing returns for the company, with it's profit down 69 per cent for that quarter.

And while the company earned $987.8-million or $3.25 per share in 2009, which was the third-highest profit in company history, it was still less than one-third the record set in 2008, those halcyon days of potash when there were record profits to be had in the fertilizer business.

How those financial figures, combined with the sudden competition right on the door step factor into the plans of Canpotex could dictate more than anything else what their plans for the Port of Prince Rupert may be in the future.

If BHP Billiton does indeed drive down the price of potash with its production, that could have a major effect on Canpotex's future shipment requirements and financial investment plans. Not to mention leave the Australians looking for a way to move their product out of British Columbia.

Clearly with a new player on the scene in BHP Billiton, there may still be something to talk about around town when it comes to potash and how its going to get to its far off markets of Asia.

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