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Nutrien increasing potash production due to uncertainty in eastern Europe

File photo. Nutrien said it is increasing potash production by nearly one million tonnes to approximately 15 million tonnes for 2022.
File photo. Nutrien said it is increasing potash production by nearly one million tonnes to approximately 15 million tonnes for 2022. Ryan Kessler / Global News

Saskatoon-based Nutrien says it is increasing its potash production capability due to the uncertainty of potash supply from eastern Europe due to Russia’s invasion of Ukraine.

Nutrien said production will increase by nearly one million tonnes to approximately 15 million tonnes in 2022.

Most of the additional volume will come in the second half of the year, the company said.

Read more: Nutrien searching for new CEO after Mayo Schmidt steps down

Canada is the world’s largest potash producer, but Russia and Belarus are also major exporters.

“The impacts of this conflict extend beyond eastern Europe as a disruption in supply of key agriculture, fertilizer and energy commodities could have implications for global food security,” Ken Seitz, Nutrien’s interim president and CEO, said in a release Thursday.

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“Nutrien is responding to this period of unprecedented market uncertainty by safely expanding potash production to help provide our customers with the crop inputs they need.”

Read more: Nutrien reports record second quarter earnings of US$1.1 billion

Potash production at Nutrien is expected to increase by nearly 20 per cent compared to 2020 and will account for more than 70 per cent of global production during this period, the company said in its release.

The company expects a small increase in its capital expenditures for 2022 and said it will hire additional employees at its mines in Saskatchewan.

“We continue to closely monitor market conditions and will evolve our long-term plans to ensure we utilize our assets in a safe and sustainable manner that benefits all our stakeholders,” Seitz said.

Andrew Wong, an analyst at RBC Dominion Securities Inc., said in a note that the gradual approach to adding supply will be well-received.

“Adding too much supply too quickly could raise concerns on longer-term oversupply,” he said. “We also believe this prudent move reflects interim CEO Ken Seitz’s significant experience and understanding of potash market dynamics, and should be encouraging for investors that management continues to execute well despite the turnover over the past year.”

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BMO analyst Joel Jackson said in a note that this move was inevitable. He added that there could be a supply gap this year even with a resolution to the war in Ukraine.

“The next move would be to invest and hire a material number of new miners to be able to target utilizing the last few millions of tonnes, but we think that would be some months away,” he said.

At the onset of the war in Ukraine, Nutrien saw its stock price soar amid worries that the conflict would worsen the already tight fertilizer market.

Nutrien was created in 2018 following the merger between PotashCorp of Saskatchewan and Calgary-based Agrium Inc. The company produces about 27 million tonnes of potash, nitrogen and phosphate products worldwide.

— with files from The Canadian Press

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