DELIVERING ON OUR POTASH PROMISE
Preparing for Tomorrow's Needs
In 2007, we announced almost $4.5 billion in new projects at our Patience Lake, Cory, Rocanville and New Brunswick operations. Debottlenecking should be complete at Patience Lake by the end of 2008, while Cory's debottleneck/expansion is expected to be completed by mid-2010. We expect ramp-up at our new mine and expanded mill at New Brunswick to begin by the end of 2011, and a large mine and mill expansion project at Rocanville is expected to be complete one year later.
We expect to develop an additional 1.5 million tonnes of potential capacity in Saskatchewan by 2015, and we are updating long-standing plans for a greenfield mine at Bredenbury, Saskatchewan.
Investing in Transportation and Distribution Infrastructure
Raising our operational capacity by approximately 5 million tonnes over five years requires investment in our transportation and distribution infrastructure and close cooperation with our rail transportation partners.
Because most long-term growth in demand is expected to come from offshore markets, Canpotex increased capacity at its Portland, Oregon terminal by 1 million tonnes in 2007. It is also considering expansion alternatives for Vancouver's Neptune terminal, and a potential new West Coast export terminal.
To meet rising Brazilian demand, two bulk fertilizer warehouses, one at Lavras that we own and another at the Port of Santos – the Perola Bulk Fertilizer Terminal that we lease through a joint venture company in which we are the majority shareholder – became fully operational in 2007. Perola's capacity is now estimated at 750,000 tonnes. Since construction began in 2005, we have invested more than $10 million in these facilities.
In 2007, Canpotex ordered 1,000 new specialized potash railcars to add to the 3,500 it already leases, and it proposes to add more over the next few years.
By investing $85 million in efficiency improvements and new automation technology for rail and loadout facilities at Allan and Lanigan, we are increasing throughput capacity to move more product faster.
Our existing contract with Canadian National Railway continues until 2010 while Canpotex has a contract with CP Rail until 2012.
Record US Crops Drive Potash Demand, PricesThe record 2007 US corn crop removed significant levels of nutrients from the soil, which should be replaced to ensure a good crop in 2008. Corn is a heavy user of potash, and the resulting demand tightened market conditions to the point that PotashCorp was required to sell product on an allocation basis to all customers. Over the year, we announced US price increases that totaled $194 per short ton for 2007 and first-quarter 2008. |
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Rising Prices Reflect Growing World DemandThe world's farmers recognize the value of potash to improve their crops, and prices have significantly increased in response to market demand. Spot market prices to Brazil and Southeast Asia nearly doubled in 2007, sharply widening the gaps with contract prices paid by China and India. We expect current supply/demand fundamentals to narrow these differences considerably. |
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World KCl Sales and Consumption GrowthWorld demand for potash can be temporarily affected, as occurred in 2006 when sales were essentially suspended during lengthy price negotiations with China and India. Fertilizer consumption, however, continued to grow, significantly depleting world inventories. Global consumption has risen steadily, averaging 5.6 percent annually over the last five years. |
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