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Strikes and Project Costs Hamper Major Potash Producers
Mar. 21, 2013
Deals with Chinese and Indian buyers have recently given the potash market greater price direction, but now project costs, national politics and labor relations are taking center stage.
This month, Vale announced plans to indefinitely shelve its $5.9-billion Rio Colorado potash project in Argentina’s Mendoza province after halting work back in January.
In a press release, the Brazilian mining giant cited “the current macroeconomic environment” as the deciding factor that led to its decision to halt work for an indeterminate period. Projected costs to complete the project have risen to $11 billion, according to Bloomberg.
The mining group also pointed to the Argentine peso’s annual inflation rate of 25 percent and to the refusal of the Argentine government to provide $3 billion in taxes breaks and other incentives as factors that contributed to the decision.
The news resulted in strong language from the Argentine government, which sees Vale’s move to halt work as a breach of concessions. The government stated that it will revoke Vale’s licences and impose significant fines if at least 6,500 workers on the mine, which is capable of producing 4.3 million metric tons (MT) of potash per year, are not kept on.
Vale executives told Bloomberg that the company remains confident that the law will “prevail,” leaving the company with the option to restart construction when a conducive macroeconomic environment allows for it.
Elsewhere, Potash Corporation of Saskatchewan continues to face local opposition to its proposed acquisition of Israeli potash producer Israel Chemicals.
On Monday, hundreds of workers blockaded the entrance to Israel Chemicals’ Dead Sea potash plant, with 1,300 workers going on strike in protest of the proposed deal.
While the strike was also in response to a number of unrelated issues, including the payment of bonuses, Bloomberg reported that Israel Chemicals workers do not agree with the proposed merger with PotashCorp.
PotashCorp’s proposed merger would have large implications for the company, expanding its market share in growing Asian markets like India and China. If the deal is approved by the Israeli government, the Saskatchewan company would gain a 51-percent stake in Israel Chemicals’ assets, including its Dead Sea potash plant.
Source: Potash Investing News
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