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Potash production in hibernation


Potash production in hibernation
In addition to news about falling grain prices comes an equally chilling announcement from the Potash Corporation of Saskatchewan, and the 940 temporary layoff notices issued to workers at three mines.

December 19, 2008  By Saskatoon Star Phoenix

December 19, 2008 

Potash Corp. of Saskatchewan issued 940 temporary layoff notices Thursday to workers at its Lanigan, Rocanville and Allan mines.

The temporary notices, described as inventory adjustment notices, cover the period of Jan. 18 through March 15.


The mines will essentially be shut down for eight weeks.

PotashCorp announced last week it would reduce potash production by two million tonnes for 2009 to match supply with market demand.

"Obviously this (layoff) will account for a substantial amount of that production," said Bill Johnson, spokesperson for PotashCorp. "We have not finalized any plans for the other sites at this point.

"Anyone who works at our sites would see that more inventory is coming out of the ground than is going out the door these days and they would understand why it's necessary to take these shutdowns."

Johnson said there is a substantial amount of inventory stored at PotashCorp facilities and at those of its customers. Potash is a bulky product that must be covered and stored properly, he said.

"That is precisely why we're having to do an inventory adjustment. If you don't have customers for it in the short term it will quickly outgrow its available storage space. Once it starts moving, the marketplace will move through that inventory fairly quickly.

"Right now, we're facing the same economic headwinds that many other industries are facing. We're seeing that our customers do not have the access to credit. Farmers have seen softening grain prices and we're of the opinion that those will turn around in the not-too-distant future."

Lee Edwards, spokesperson for the United Steelworkers (USW) union, said the layoffs are a sign of what is going on in the economy. USW represents workers at the Allan mine.

"It's, in part, the time of year and, in part, the economy," said Edwards in an interview. "Any industry you're looking at right now, there are layoffs."

"Hopefully things will turn around . . . and do so quickly."

The plunging fertilizer market has also caused PotashCorp to reduce its 2008 earnings per share forecast to $10.75, down from its earlier earnings guidance of $12 per share.

The downward revision reflects the softness in demand for most crop nutrients, the company said.

PotashCorp said sales volumes of all fertilizers — potash, nitrogen and phosphate — have fallen off in the fourth quarter of 2008.

Johnson said the company expects 2009 will be a mirror opposite of 2008, in which the first three-quarters were strong and the fourth weak. By mid-2009, the market should turn around substantially, he said.

PotashCorp's full-year earnings will nonetheless set a company record, more than tripling the $3.40 per share earned in 2007.

PotashCorp is not the only fertilizer company to announce layoffs. Last week, Agrium Inc. issued layoff notices to 380 workers at its Vanscoy mine, just west of Saskatoon. The company has said the notices are only precautionary, but eight weeks' notice must be given for indefinite layoffs.

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