Market fire turning Potash Corp./Saskatchewan (NYSE:POT) to ash
The Saskatchewan government says that it’s too early to say how exactly what effect the dip in the potash market will have on its bottom line or on the economy of the province. Stocks of all major potash producers like Potash Corp./Saskatchewan (NYSE:POT) in North America slid downhill post the news that a certain Russian corporation is making some moves that have the potential to pull the mineral fertilizer prices even lower.
Government monitoring in progress
A government spokesperson, Kathy Young said that it is just too soon to know exactly what impact the OAO Uralkali announcement will have on the production and price as well as provincial potash-revenues in Saskatchewan. She said that these developments will be monitored closely. Discussions will be held with the potash producers in the region understand what the impact of this shake-up will be. Information about potential effects will be included in the Q1 update that the government will be releasing in August.
The big players
The Saskatchewan Party government has been banking on revenues from potash to help in meeting its goal of a decent budget-surplus in 2013.The projection is that potash will contribute around $520M to the provincial coffers between 2013 and 2014. This turmoil is affecting companies like POT, Agrium and Mosaic. All these corporations have sizeable potash operations in the province. Economists say that this huge price drop may reduce the economic growth in the region by almost 50%.
The wait continues
A commodity expert at Scotiabank, Patricia Mohr said that new potash project launches in Saskatchewan will definitely be delayed by a few years. She said that in some cases, the prices that are necessary to justify the investment are very high and that a lower pricing-environment will automatically mean that some capital investment in the region will be deferred. At the moment, companies like Potash Corp./Saskatchewan (NYSE:POT) are monitoring the situation and feel that it is too early to comment on exactly what effect the current development will have on their operations.