November 2007

Growth of a fertilizer company

PotashCorp expansion projects in Saskatchewan

By H. E. Robinson

Potash Corporation of Saskatchewan Inc. (PotashCorp) is currently expanding the capacity of five sites in the province to raise total production capability from 10.7 million tonnes (in 2007) to 14.9 million tonnes by 2011.

Potash is only found in 12 countries, but it is needed in almost every country in the world. PotashCorp produces potash, nitrogen, and phosphate products for use as fertilizer for agricultural crops, as a phosphate component of feed ingredients for animal nutrition, and for the production of industrial chemicals. Potash is the core of the company’s business.

Global demand for potash is increasing. Most of the industry is operating at or near full capacity so PotashCorp is expanding potash capacity to help meet that demand. PotashCorp currently holds 22 per cent of the world’s potash capacity and 75 per cent of the world’s excess capacity. The company is bringing back some idled capacity, as well as expanding its production capacity.

In the late 1980s, there was a decline in the demand for fertilizers with the collapse of the Soviet Union. PotashCorp responded by reducing production to match market demand and idled some capacity.

The president of PCS Potash at PotashCorp, Garth Moore, has been in the potash industry for over 34 years. “The potash industry experienced an over-capacity situation for a decade,” Moore explained. “But the market has finally caught up to the world capacity, and the increasing demand for potash means we have had to bring back our idle capacity to meet the ongoing need.”

Expansion projects at the company’s Rocanville site were successfully completed in 2005 and at Allan in 2007. Idle capacity at PotashCorp’s Lanigan site is currently being reinstated and is expected to finish in the second quarter of 2008. This project will bring back 1.5 million tonnes of production capacity per year by refurbishing a mill, upgrading equipment and hoists, and improving compaction capability. The facilities at Cory will also add another 1.2 million tonnes of capacity by mid-2010, and enable the site to produce red potash; it currently produces only white potash products. All of these expansion projects involve getting more product from underground to the surface, increasing throughput at the mills, and maximizing production in the mine. However, the Patience Lake project is different. This site is a solution mine, which is expected to finish expansion by 2009. Solution mines use a warm brine injected below ground that works through the mine and comes up to be processed. In this case, the expansion project entails more pipeline work to bring back 360,000 tonnes of annual capacity.

“In total,” said Moore, “[these expansion projects] will add more than four million tonnes of new or revitalized capacity in Saskatchewan and New Brunswick. The world market is about 50 million tonnes per year of potash requirements. The growth of the market is estimated at three to four per cent per year, which amounts to an expected 1.5 to 2 million tonnes of new production required in the market each year. We are bringing up our production capabililty to keep up with that growth.”

The main factor contributing to the increasing global demand for potash is economic growth in countries like China and India. As people make more money, their diet tends to improve. This primarily involves increasing the amount of protein in their diet. More protein translates to more meat, which means more animal food requirements (or feed). This results in more agriculture, such as corn, and finally increases the demand for fertilizers. Soybean producers in Brazil are also expanding at a rapid rate and they are heavy users of potash.

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