Nutrien Ltd., the Canadian company that is the largest fertilizer producer in the world, has announced a major ramp-up of potash production capacity as the war in Ukraine drives concern over global food security.
The Saskatoon-based company said Thursday it plans to increase its potash production capacity to 18 million tonnes per year by 2025, a 40 per cent increase over 2020 levels.
The projected capital cost of the ramp-up is approximately $200 per tonne, which the company said is relatively low because the expansion will take place within existing installed capacity.
As part of the ramp-up, the company will hire more than 350 new employees, with the bulk of new investment happening at its Cory, Lanigan, Allan and Vanscoy mines in Saskatchewan.
“Underground mine development, securing additional mining equipment, increasing site-based storage and load-out and hiring additional employees are all needed to facilitate the increase in production," said Nutrien interim CEO Ken Seitz in an investor presentation Thursday.
He added the company is also evaluating additional brownfield opportunities that could expand production capacity beyond 18 million tonnes to 23 million tonnes annually. Nutrien expects to make a final investment decision on those additional opportunities within the next 12 months.
Nutrien, which was created in 2018 as a result of the merger between PotashCorp of Saskatchewan and Calgary-based Agrium Inc., has seen demand for its plant nutrient products increase dramatically in the last two years. In 2021, the company increased its capacity by one million tonnes annually in response to growing global demand and market disruptions created by sanctions against Belarus.
Then in March of this year, it announced a production hike of an additional one million tonnes in the wake of western sanctions against Russia, which escalated global concerns over fertilizer supply. (Russia and Belarus account for approximately 40 per cent of global production and exports of potash, a key plant nutrient used in agriculture.)
Seitz said Thursday that it could take several years for global fertilizer markets to recover from the current disruption.
"“We have seen significantly reduced exports from Belarus and Russia over the past few months, and also expect delays in the development of new capacity from these regions as access to financing, equipment and other supplies becomes more challenging," he said.
"There's no simple or fast solution to overcome this challenge."
Nutrien has six potash mines in Saskatchewan and two large phosphate mines in the U.S. It is also the world's third-largest producer of nitrogen. (Potash, phosphate and nitrogen are the three main plant nutrients used in commercial fertilizer.)
The company exports its products around the world, with Brazil, China, India, Indonesia and Malaysia accounting for 70 per cent of its offshore sales.
Last month, Nutrien announced a record first quarter profit of US$1.4 billion for the period ended March 31. That works out to $2.49 per share, more than 10 times the 22 cents per share it earned in the same period of 2021.
Nutrien's stock price is up more than 40 per cent year over year. The company's shares were trading at $113.13 at mid-day Thursday, up 2.02 per cent from the prior day's close.
This report by The Canadian Press was first published June 9, 2022.
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Amanda Stephenson, The Canadian Press
