Saskatchewan has been a juggernaut of economic growth in recent years as it has benefited from the resource and agriculture boom.
With nearly a third of the world’s known potash reserves lying beneath its fertile fields, Saskatchewan has been positioned like few others to garner the rewards of the fertilizer boom.
But an unheard of thing is happening even while potash prices remain relatively high in historic terms — pink slips are being handed out at Saskatchewan’s potash mines.
Analysts say they expect the Saskatchewan potash industry to enjoy net realized potash prices — what the companies earn, less production and transportation costs — of around US$380 a tonne for the next two years. To put that in perspective, just two years ago potash prices were sitting at about $190 FOB Vancouver.
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As this issue of Country Guide goes to print, layoffs that could total 3,000 employees have been announced by the province’s three potash mining giants — Potash Corp. of Saskatchewan, Mosaic and Agrium.
Industry spokespeople say the move is part of a long-standing trend to match demand and production, while critics say the move is akin to OPEC controlling oil production to drive the price up. Potash Corp., the world’s largest potash producer, says it’s aiming to cut production by two million tonnes, or 20 per cent, in 2009.
There’s no denying that the financial crisis has put a crimp in demand, but critics of the move say with prices remaining strong, the strategy is cold comfort to both miners and farmers.
The Saskatchewan Potash Council represents the unionized workers in the province’s mines and has taken aim squarely at management, saying miners are being sent home and equipment idled while management reaps record salaries and bonuses and bottom lines are more than healthy.
PotashCorp CEO Bill Doyle has been the biggest target so far, earning $17 million in salary and bonuses in 2007. In fact, the Financial Post newspaper says he was the highest paid CEO in Canada that year, pulling down a grand total of $320 million when 10 years of accumulated stock options are taken into consideration.
“Perhaps it’s time we asked these companies to justify laying off Saskatchewan workers, while they continue to pay their corporate executives exorbitant sums of money,” the union council said in a recent media release.
However, market analysts say the move by potash producers is likely to work.
