The Progressive Economics Forum

Don’t Know Much About Canpotex

Posted by Erin Weir under big business, international trade, media, potash, Saskatchewan.
August 29th, 2010
Comments: 1

A key issue arising from the proposed potash takeover is BHP Billiton’s musing about leaving Canpotex, the agency that has long marketed Canadian potash offshore. (Growing up near the railroad tracks in Regina, Canpotex train cars were a familiar sight.)

Perhaps BHP believes that it alone has sufficient clout to manage supply and negotiate overseas prices without Canpotex. But other Saskatchewan potash mines for which BHP is not bidding also rely on Canpotex.

Perhaps BHP believes that it could generate more profit by exporting a significantly larger quantity of potash, without significantly depressing the price. If so, the implication is that Potash Corp management has misjudged the demand curve.

Or maybe BHP plans to flood the offshore market with cheap potash and accept lower profits in the short term. If BHP could thereby put competitors (in Saskatchewan or elsewhere) out of business, it might achieve even more pricing power and greater profits in the long term.

Saskatchewan political leaders, the companies currently mining potash in Canada, and their employees have raised concerns about these possibilities. So, BHP has been backpedalling on the prospect of withdrawing from Canpotex. This backpedalling took an hilarious turn in Wednesday’s Globe and Mail:

Graham Kerr, president of BHP’s potash operations, said if the company’s bid is successful it will study the Canpotex agreement more closely. “I am not close enough to the insights of how Canpotex operates to say if it’s a good, bad or indifferent organization.”

Does Kerr actually expect anyone to believe that BHP bid US$39 billion for Potash Corp without studying Canpotex first? As BHP’s potash president, has he really not formulated any views on Canpotex?

Anyway, if BHP is looking to hire a potash president who has some sense of how Canpotex operates, just e-mail the job posting to: “info [at] progressive-economics.ca”.