Nutrien planning major potash production increase as war in Ukraine puts pressure on global supplies

Nutrien planning major potash production increase as war in Ukraine puts pressure on global supplies

Nutrien Ltd. is planning a major ramp up in potash production as the war in Ukraine exerts relentless pressure on global supplies of the key fertilizer.

Saskatoon-based Nutrien, the world’s biggest fertilizer producer, said on Thursday it intends to boost its annual potash production to 18 million tonnes by 2025, about 21.5 per cent higher than current levels. This year, Nutrien expects to produce about 14.8 million tonnes, a figure that had already been revised upwards several times.

Before the war in Ukraine, Russia and Belarus accounted for roughly 40 per cent of global potash production. But exports fell about 20 per cent in the first quarter compared to the previous year owing to sanctions imposed by the West. Sanctions in Belarus predate those imposed on Russia.

“Nutrien is really the only major player with idle capacity on the planet,” said Steve Hansen, an analyst with Raymond James in an interview. “That three million tonnes [of excess production] is sorely needed.”

To meet its higher production targets, Nutrien intends to make further investments in underground mining equipment, mine development, and hire about 350 people.

Nutrien said on Thursday it is also weighing a possible increase in production of nitrogen, another critical crop nutrient, saying annual sales could rise to 13.5 million tonnes by 2027.

Citing “escalated concerns for global food security,” Ken Seitz, interim chief executive officer with Nutrien, said in a release that he sees the potential for “multiyear strength” in agriculture and crop input fundamentals.

The company earned a record US$1.4-billion in the first quarter and doubled its profit forecast for the entire year, as it benefitted from a surge in fertilizer prices and fears over further supply shortfalls.

After hitting a record of $148 apiece in April, Nutrien shares have fallen by more than one fifth. That’s primarily because North America nitrogen prices fell sharply after an inventory buildup following a late planting session in major markets like North Dakota, Minnesota, South Dakota and Western Canada. Still, with Russia being the world’s biggest exporter of nitrogen, Nutrien is anticipating possible supply shortfalls in the future. Last month, it announced it was evaluating the construction of a new $2-billion plant at its existing Geismar nitrogen facility in Louisiana.

Nutrien was formed in 2018 after Agrium Inc. merged with PotashCorp of Saskatchewan. It has recently come through a tumultuous period that saw it terminate two CEOs in the span of about eight months. Mayo Schmidt was let go in January after personality clashes with subordinates, poor performance in marketing meetings with investors, and tension with the board, the Globe and Mail reported. His predecessor, Chuck Magro, was cut loose in April of 2021 after a strategic fallout with the board over a possible joint venture deal with Australian mining giant BHP Group Ltd. on the multibillion-dollar Jansen potash project in Saskatchewan, the Globe also reported.

BHP later announced it will build Jansen on its own. The project won’t help alleviate current potash capacity constraints in the market as it isn’t scheduled to come online for another five years. Raymond James’s Mr. Hansen isn’t ruling out that Nutrien could still elect to team up eventually with BHP on Jansen, despite the talks fizzling last year.

“Never say never,” said Mr. Hansen. For BHP, a partner would help it split the costs of construction and risks around execution.

Shares in Nutrien were up 2.3 per cent in midday trading on the Toronto Stock Exchange.