Saskatchewan potash : near-term problems, long-term optimism

Introduction Potassium, together with nitrogen and phosphorous, is an essential nutrient required for growth. Since all living things need potash, the major demand for potash - about 95% of the total - is as a fertilizer. Agricultural productivity has increased dramatically in recent times. This increase in crop yields requires substantial amounts of added nutrients to keep the soil fertile. It follows then that potash will always be in demand. There is no substitute. Other fertilizers that contain phosphorous (P) and nitrogen (N) are complementary and not competing products. Fireplace ashes (pot-ashes) have a relatively high potassium content. Their value as a fertilizer had been recognized for centuries. But today's potash industry did not begin until deposits of potassium-rich ore were discovered and exploited in Europe during the 19th century. Canadian potash development Potash in Saskatchewan was first recognized in 1943. It was discovered as a byproduct of an oil exploration program. But it was several years later before the existence of a major commercial deposit was acknowledged, and not until 1951 that the first attempt at development occurred. That attempt was unsuccessful. The shaft flooded and was abandoned. It did, however, demonstrate the need for new technology to penetrate the waterlogged Blairmore layer. This was eventually developed and the first mines were brought into production in the early 1960s. Once the technology was available, and the extent and quality of the potash beds became known, a number of companies proceeded to develop mines. By 1970, seven mines were in operation and three more were nearing completion. Combined, total capacity then was 7.6 Mt/a (8.4 mil¬lion stpy) K20. At that time, world potash consumption was about 15 Mt/a (16.5 million stpy). This increase in supply from Canada produced a large potential surplus that shattered the prevailing balance between supply and demand. Although world demand increased steadily throughout the 1960s and early 1970s, it was several years before world supply and demand were again in balance. Saskatchewan capacity has been expanded a number of times. It now stands at 10.7 Mt/a (11.7 million stpy) K20. Actual production has not approached this figure, however. Two new mines in New Brunswick have recently been built with a combined annual capacity of 1.2 Mt (1.3 million st) K20. Total Canadian capacity of about 12 Mt/a (13 million stpy) now amounts to 30% of world capacity. Central offshore marketing organization Canadian Potash Exports Ltd. (Canpotex) was created in 1970 as the offshore marketing organization for Canadian producers. Canpotex is owned by Saskatchewan producers and is their exclusive marketing organization for offshore business. Each company handles its own sales in Canada and the US, but all sales to other markets are handled through and by Canpotex. The Saskatchewan industry has an ore body of a size and consistency unmatched anywhere in the world. Large efficient mines have production costs that compare favorably with other producing countries. On the minus side, Saskatchewan is remote from most major markets. It therefore needs the ef¬ficiencies that stem from one organization that coordinates all offshore shipments and minimizes distribution costs. Agriculture guides potash market In the period following World War II, potash was a classic growth industry. World demand increased each year from 1945 to early 1970s. Since then, demand has been more erratic. Some years show substantial increases, but are followed by significant declines. For about the last decade, the pattern has been unclear and future demand has become correspondingly difficult to predict. North America and Europe together account for about 40% of the world potash consumption. In both areas, farming is characterized by surplus production, declining crop prices, and expensive government support programs. Under those circumstances, farmers respond by minimizing input costs. Fertilizer is one of the items they reduce. Potash is retained in the soil. It is possible to reduce potash application with no immediate deterioration in crop yield. The lower yields occur only when potash levels are depleted. So, farmers can econo-