While Vale anticipates that iron ore prices will rebound as early as next month, the company is less bullish on the future of potash prices and on Thursday postponed its $3 billion Saskatchewan potash mining project.
On the same day, PotashCorp notified employees that it will temporarily shut down its Lanigan, Saskatchewan mine for nearly a month. In a one sentence statement, the group said said," Consistent with PotashCorp's practice of matching supply with market demand, notice was given to our employees that Lanigan will not operate between September 15 and October 13."
Charts released by PotashCorp Monday showed North American potash inventories were 30% above the five-year average in July, although end-of-month inventory for July was down by 462,520 tonnes.
The ongoing drought in the U.S., which is hammering the country's agricultural production, has also raised concerns about the future demand for potash.
Vale CEO Murilo Ferreira told reporters in Brazil Thursday that the company will postpone its $3 billion Kronau potash project near Kronau, southeast of Regina. The project was expected to mine up to 2.9 million tonnes of potash annually.
Cory McPhee, a long-time spokesman for Vale's Canada, told reporters there is no firm timeline on when construction of the potash mine will begin. "We have been in conversation with representatives of the Saskatchewan government and we impressed upon them that we still see some great opportunities for us in Saskatchewan. But this is one project that is going to take a little longer," he told The Canadian Press.
Saskatchewan's Minister of the Economy, Bill Boyd, told news media Thursday, "We have heard that Vale is working through some challenges they're facing in terms of investment."
"I don't think they've walked away from it and it's our understanding that they're not going to lay people off or anything of that nature," he added.
Nevertheless, Boyd told the Star Phoenix that he thinks "an explosion of investment into the potash sector from other companies" will continue.
"I think what we're seeing is one company with some challenges," he stressed. "What we're seeing from other companies is a significant ramping up of spending between the existing players and new entrants to the marketplace."
IRON ORE
Meanwhile, while Vale's Ferreira made it clear that the world's largest iron ore producer is committed to "cost austerity," the CEO made it clear that Vale's priority is development of the $8.04 billion Serra Sul investment (Carajás S11D Iron) in Carajas. S11D will supply 90 million metric tons of iron ore per year. Startup is anticipated in the second half of 2016.
Ferreira forecast that there will be a good improvement in iron ore prices beginning in September or October because of declining iron ore stockpiles in China and rising Chinese construction demand. He observed that iron ore supplies in China would last only 20 days instead of the usual 30 days, which will pressure global markets.
Dorothy Kosich
Mineweb
