Potash cartel breakup raises economic growth concerns
Potash production represents about 1.5% of Canadian goods exports.
TORONTO – The Canadian dollar closed lower Tuesday amid questions over how a major change in marketing fertilizer will impact Canadian economic growth.
The loonie was down 0.4 of a cent to 97.07 cents US after a Russian-based rival to Potash Corp. and other North American producers broke up a European marketing group that controls about 43% of global exports.
Russia’s OAO Uralkali plans to run at full capacity after changing its trading policy in a move that signals potash prices will weaken considerably.
Chief executive officer Vladislav Baumgertner said that the change in the company’s trading policy could drag potash prices to less than US$300 a ton, which is at least 25% below the current contract price for China.
CIBC World Markets chief economist Avery Shenfeld noted that “potash production is a bit under a half per cent of Canadian gross domestic product, and represents about 1.5% of Canadian goods exports.”
“A drop of 25% in volumes in the third quarter (is) not unreasonable, and it could in fact be 30 to 40%, associated with production being curtailed as buyers sit and wait for lower prices,” he added.
©The Canadian Press