Potash Corporation of Saskatchewan Inc. Business History
Potash Corporation of Saskatchewan Inc. (PCS) is an integrated fertilizer and related industrial and feed products company. The Company owns and operates five potash mines in Saskatchewan and one in New Brunswick. It also holds mineral rights to the Esterhazy mine where potash is produced under a mining and processing agreement with a third party. Its phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers; animal feed supplements and industrial acid, which is used in food products and industrial processes. It has a phosphate mine and two mineral processing plant complexes in northern Florida and six phosphates feed plants in the United States. Its nitrogen operations involve the production of nitrogen fertilizers and nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate and nitric acid. It has nitrogen facilities in Georgia, Louisiana, Ohio and Trinidad.
History – The Potash Corporation of Saskatchewan Inc. was a crown corporation of the Government of Saskatchewan until the IPO on November 2, 1989. PCS has acquired numerous interests in Canada, the United States, Israel, Chile, and the Middle East. PCS has undertaken numerous expansion projects at its various facilities to increase production capacity in response to the steadily increasing demand for fertilizers and industrial products.
Management
| William J. Doyle | President, Chief Executive Officer, Non-Independent Director |
| Wayne R. Brownlee | Chief Financial Officer, Executive Vice President, Treasurer |
| Stephen Francis Dowdle | President – PCS Sales |
| Brent E. Heimann | President – PCS Phosphate and PCS Nitrogen |
| Garth William Moore | President – PCS Potash |
| G. David Delaney | Chief Operating Officer, Executive Vice President |
| Joseph A. Podwika | Senior Vice President, General Counsel, Secretary |
| Robert A. Jaspar | Senior Vice President – Information Technology |
| Lee M. Knafelc | Vice President – Administration and Human Resources |
Production
Main products –PCS’s main products are the three primary crop nutrients: potash (K), phosphate (P) and nitrogen (N). PCS is responsible for approximately 20 percent of global capacity.
Main Markets – PCS’s key global markets are China, India, other parts of Asia, Latin America, and North America.
Supply and Demand of Potash
World demand for potash fertilizers is projected to increase at an annual average rate of about 2.7 percent (below), equivalent to an increment of 3.5 million tonnes per year.
Regional and subregional contribution to change in world potash consumption 2008–2012
Potash
The global capacity of potash was reviewed in detail by the International Fertilizer Association (IFA) in 2007. The review resulted in revised effective capacities and up-to-date operating-rate adjustments. World potash capacity is set to increase by almost 9 million tonnes K2O in the period 2008–2012 – a growth of more than 20 percent. The world’s average operating rate is estimated at about 87 percent. Major expansions are scheduled in Russia, Argentina and Canada towards the end of the projection period. Other producers in Belarus, Jordan, Israel, and United States of America are expected to expand capacity more gradually.
With prices for the nutrients produced by PCS set by commodity exchanges it is important to ensure that demand and supply are closely matched to ensure maximum revenues. The following table shows how closely supply follows demand, demonstrating the ease with which production can be increased. PCS operates under a low cost of production for its agricultural nutrients, allowing it to realize economic profits for its high demand products.
World N, P2O5, K2O nutrient supply and demand, 2008–2012
| | | 2008 | 2009 | 2010 | 2011 | 2012 |
| | (thousand tonnes) | |||||
| Total supply | 202 637 | 210 993 | 219 282 | 228 209 | 239 823 | |
| Total demand | 198 860 | 204 879 | 210 567 | 216 432 | 222 037 | |
| Potential balance | 3 777 | 6 114 | 8 716 | 11 778 | 17 786 | |
| Potential balance as % of projected demand | 1.9 | 3.0 | 4.1 | 5.4 | 8.0 | |
Stages of Production – The potash ore is mined from underground; the ore is crushed and then scrubbed and deslimed of insoluble components by flotation in a water solution. Course and fine media are conditioned separately. Potash is separated by flotation in a brine solution. The final product is separated from the brine solution by centrifugation and drying, resulting in standard and fine grades. A compaction plant must be used to produce coarse and granular sizes.
Overview of Productivity –
Pricing for main products – Market controlled and spot contracts with purchasers.
Significant fixed and variable costs – Fixed costs include labour (mining and processing), . Variable costs include transportation.
Company profits and profit margins – PCS has realized an operating profit margin of approximately 50% with a net profit margin of 35% on revenues of $6.5 billion
Competition
Strongest Competitors – Agrium Inc., Mosaic Co., Intrepid Potash Inc., Compass Minerals Intl., K+S AG
Competitive Advantage – Controls approximately 20% of global potash production; large economies of scale and efficient production techniques.
Summary
The Potash Corporation is the leader in the fertilizer oligopoly due to their possession of mineral rights to approximately 20% of the global potash reserves. Despite PCS’s near monopolistic position in the fertilizer industry in Saskatchewan, it is still reliant on market demand for their product and the prices obtainable through global commodity markets and spot price contracts with major customers. However, the ever increasing demand for food worldwide will continue to increase demand for their products, which will keep market prices high enough to ensure healthy economic profits for years to come.
Sources
Corporate information
Official Home Page
Current & Future Potash Outlook
Current world fertilizer outlook
Potash Processing in Saskatchewan
No comments:
Post a Comment