New Potash Corp CEO sticks with output strategy as competition builds

Tue Jul 8, 2014 3:03pm EDT
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By Rod Nickel

WINNIPEG Manitoba (Reuters) - The new chief executive officer of Potash Corp of Saskatchewan (POT.TO: Quote) says he will stick with the Canadian company's focus on supporting the price of potash by matching output of the crop nutrient to demand, rather than maximizing sales volume to fend off competition.

Profits at Potash Corp, the world's second-biggest potash producer, have dropped sharply as potash prices hit a six-year low earlier this year. The breakup nearly a year ago of global potash trading partnership Belarusian Potash Co (BPC) accelerated the slide in price, as it created more competition among producers.

"The principle and the strategy of aligning production with demand has been a very successful one, and so therefore the answer is, there’s no reason to change that going forward," CEO Jochen Tilk told Reuters in an interview on Tuesday. Tilk, an engineer raised in Germany, replaced longtime Potash Corp CEO Bill Doyle on July 1.

Potash Corp sells potash outside North American through its Canpotex partnership with Mosaic Co (MOS.N: Quote) and Agrium Inc (AGU.TO: Quote).

Tilk said "your guess is as good as mine" on whether potash producers Uralkali OAO (URKA.MM: Quote) and Belaruskali forge a new BPC partnership, which could boost potash prices.

Tilk also faces the prospect of additional competition in his own backyard in Canada, as Germany's K+S AG (SDFGn.DE: Quote) and Anglo-Australian miner BHP Billiton PLC (BLT.L: Quote) build new mines in the province of Saskatchewan.

A former CEO of Inmet Mining, a now taken-over copper, zinc and gold producer, Tilk said it's too soon for him to outline specific plans for Potash Corp. But he said lowering operating costs is a priority, as that would leave the company well-positioned for a conservative demand scenario while maintaining idled capacity that would be available if markets heat up.

Global expansion of potash mining capacity, led by Potash Corp's own decade-long buildout, has exceeded the pace of demand growth, adding further pressure to prices.   Continued...

Chris McKay, PotashCorp load-out supervisor at the Cory Mine, examines potash inside one of the storage facilities near Saskatoon, Saskatchewan October 10, 2013.   REUTERS/David Stobbe