PotashCorp announced Tuesday it is cutting its workforce by more than a thousand people, but the cuts will not directly affect PotashCorp Rocanville.
“These changes are very specific and they will not directly affect the Rocanville operation,” said PotashCorp spokesperson Bill Johnson.
“The changes are specifically at Cory and Lanigan.”
While PotashCorp has often had temporary shutdowns at its sites for inventory control, these layoffs are more long term.
“At times in the past we have had to do inventory adjustments, and we’ve had temporary downtime at some of our sites,” said Johnson.
“This is quite a bit different. This is not a temporary shutdown. We will be putting one of two mills at Lanigan into care and maintenance,” meaning the mill will be maintained so it can be fired up again if the capacity is needed.
Johnson said the cuts were to the higher cost mines to operate, while the lowest cost mines, including Rocanville, were spared.
“A number of factors were considered,” he said. “We need to be as globally competitive as we can be. There is more pressure than ever to operate at the lowest cost possible, so we are focusing on our lowest cost mines.
“Rocanville and Allan are our two lowest cost facilities. Rocanville is a very large mine so we’re able to spread our costs over more tonnes than in a smaller mine.
“Rocanville is just a first-class facility. We’ve got an excellent workforce, it’s a very modern facility with good operations and the best production capabilities of any of our mines. It started off with a low cost profile and the expansions we’re doing will make it more so.”
Johnson said that, while PotashCorp is reducing capacity at Lanigan and Cory, it will continue with its $2.8 billion expansion to add capacity at Rocanville.
“The expansion will go ahead and it will be completed,” he said. “As a company we produce to the level the market is buying our product at and that will continue to be our strategy going forward.”
Johnson said that the potash market has not expanded as quickly as was anticipated when the Rocanville expansion was announced six years ago.
“What we’ve seen in our business is not that our business has grown smaller, but that it has not grown as much as anticipated,” he said. “When we made the decision in 2007 to expand Rocanville it would be with the thought there would be market growth, and we still believe that. The long term outlook is very positive. We’ve got a growing world population, and increased demand for proteins but what we have seen is that the growth in demand is not always in a straight line.”
Work continues on the expansion at Rocanville.
“They’re still working on the shaft, there is still mine development going on,” Johnson said.
“The time frame for new production out of the mine is 2015. We’re about 90 per cent of the way through the spend, but the last 10 per cent is important.”
Johnson said laid-off miners from other facilities may be hired at Rocanville.
“We’ve got some exceptional employees in our company who will find out that through no fault of their own that they are out of work. We would hope we would find positions for them in our other facilities.”
In total, PotashCorp is cutting 1,045 positions with the biggest hits in Saskatchewan, and many losses in Florida and New Brunswick.
“This is a difficult day for our employees and our company,’’ said Bill Doyle, PotashCorp’s president and chief executive.
“While these are steps we must take to run a sustainable business and protect the long-term interests of all our stakeholders, these decisions are never easy.
“We understand the impact is not only on our people, but also in the communities where we work and live, and PotashCorp will work hard to help those affected through this challenging time.’’
In Saskatchewan, 440 people will be affected. Most of the losses will be at the Lanigan division, where one of two mills will suspend production by the end of 2013, at the Cory division, where production will be reduced, and at the Saskatoon headquarters.
The Saskatchewan government said it would dispatch its rapid response teams to help those affected find work in other sectors.
“We are fortunate that this has occurred at a time of relative labour market strength and that our economy today is more diversified than ever,’’ Premier Brad Wall said in a statement.
The premier said the government would also look to improve its work to match training resources with labour needs.
In addition to the cuts in Saskatchewan, New Brunswick will see 130 people affected while the rest will be outside Canada, including more than 435 in the United States.
Florida will lose 350 jobs while another 85 people will be affected in North Carolina.
One of two phosphate plants in White Springs, Fla., and the Suwannee River chemical plant, will be closed. A loss of capacity at White Springs is expected to be partially offset by higher output at Aurora, N.C.
There will be another 40 jobs affected in other parts of the United States and in Trinidad.
Potash prices and the shares in the companies that produce it were hit hard earlier this year when Russian-based Uralkali, one of the world’s largest potash producers, quit the Belarusian Potash Company export partnership.
In expectation of lower prices on the world markets, China and India—key markets for fertilizer—delayed purchases and shipments plunged.
Belarusian Potash accounts for about 43 per cent of the global potash market and competes with Canpotex, a Canadian-based group that sells potash abroad on behalf of PotashCorp., Mosaic Co. and Agrium
According to PotashCorp, the cuts shouldn’t impact the company’s ability to meet customer demand.
“We anticipate our operational capability for 2014, along with our inventory position, will provide us the ability to supply more than 10 million tonnes, which should provide ample supply cushion,” PotashCorp said in a statement. “Although staffed to run at reduced levels for the foreseeable future, our Lanigan and Cory plans provide the flexibility to ramp-up operations as market conditions warrant.”
Most of the layoffs are immediate. “The majority of changes are anticipated to be completed in 2013,” said PotashCorp, “although certain positions at impacted operations are expected to remain in place through a transitional period. Where feasible, affected employees will be offered voluntary severance packages prior to any involuntary reductions. Additionally, we are committed to providing assistance to all our employees in their transition to new opportunities. Severance and assistance programs are expected to exceed those that are typically provided in similar situations.”
PotashCorp is expecting the changes to save significant amounts of money.
“We anticipate the outlined changes will result in lower per-tonne operating costs—most notably in our potash and phosphate segments—thereby enhancing the competitive position of each nutrient on a global basis.
“We expect potash cost savings of $15-$20 per tonne in 2014 with a targeted reduction of $20-$30 per tonne by 2016 (from 2013 levels). In phosphate, we anticipate an annualized gross margin improvement of approximately $10-$15 per tonne.”