BPC breakup to push Canpotex into race for potash sales
"I've never seen a company commit suicide in the open market before," Schwartz of Baskin Financial said. "Hopefully, they'll kiss and make up and all this will go away."
The timing of Uralkali's move is devastating to Canpotex in one sense, coming just as it tries to strike a second-half supply contract with China's Sinofert Holdings Ltd.
From another perspective, however, a big drop in potash prices will cast doubt over the development of new potash mines, in particular BHP Billiton Ltd's plan to build the world's biggest potash mine in Western Canada, the Jansen project.
"I think Jansen was probably dead before this and now it is certainly dead," said Mark Gulley, an analyst with BGC Financial LP. BHP declined comment.
Jansen is slated to produce 8 million tonnes of potash a year once it is up and running in 2017, a clear threat to Canpotex' stranglehold on North American exports.
While North American producers' shipments to China are likely to drop off if they stay within Canpotex and if Uralkali runs its mines flat out, Canpotex will likely stay strong in growing South American markets like Brazil, analysts said.
"I assume that Canpotex would continue to function," said Paul Burnside, analyst at CRU. "I would have thought prices would really have to fall down to cost of production for Canpotex to become unworkable, but the members may have divergent views on how to respond to the break-up of BPC."
For Potash Corp, it is business as usual for now, but the company is keeping a close eye on Uralkali's moves, spokesman Bill Johnson said.
Agrium CEO Mike Wilson was not available for comment, and Canpotex officials did not respond to a request for comment.
The role of Canpotex loomed large in the 2010 debate about whether Canada should approve a $38 billion bid for Potash Corp from BHP. Canada rejected the bid after Saskatchewan raised concerns that weaker potash prices would cut its royalties.
Canpotex's infrastructure includes 5,000 rail cars and export terminals in British Columbia and Oregon.