In a move that shook New Brunswick’s fragile economy, Potash Corporation said lack of demand from core markets in Brazil for potash fertilizer had forced it to cut expenses by shutting down its Picadilly, N.B. potash mine near Sussex (N.B.) for an indefinite period, resulting in the loss of 430 well-paying jobs. Potash Corporation will service Picadilly’s customers from its lower-cost operations in Saskatchewan.
The move is expected to save the company about $15 million in operating expenses in 2016, after $35 million in severance costs. In addition, the move will save the company about $135 million of planned capital expenditures during the next two years. At full production, Picadilly’s capacity represented 1.8 million tonnes annually. The closing comes on the heels of the closing of another PotashCorp mine near Sussex, namely the Penobsquis mine in November of 2015. That mine had a production capacity of 800,000 tonnes annually.
Potash Corporation invested almost $2 billion over six years getting the mine ready for full production, but equipment problems and other operational problems led to delays. In addition, it was reported that operating expenses were significantly greater than in the company’s mines in Saskatchewan. The mine, which opened in November of 2014, will be kept on a care and maintenance basis until its fate will be decided by market conditions.
In July of 2013, the breakup of the Belarusian Potash Co cartel rocked the market and spelled increasing global competition, the effects of which are continuing today. On January 28, 2016 Potash Corp announced that its revenues for the fourth quarter of 2015 had decreased by 29 per cent to $1.35 billion, and that net earnings had fallen to $201 million from $407 million a year earlier. For the year ended December 31, 2015, the company reported a net profit of $1.270 billion on sales of $6.279 billion, compared with a net profit of $1.806 on sales of $6.539 during the year ended December 31, 2010, the year the battle over BHP’s takeover offer raged. For 2016, the management expects that while global potash shipments will continue near all-time highs, global competitive pressures will erode pricing further.