Uncertainty on the potash market has forced the provincial government to dip into a reserve fund to keep a balanced budget.
A third quarter financial report released on Feb. 14 showed revenue down $144 million compared to previous estimates, largely due to declining potash royalties as the price of the mineral has dropped by as much as 30 per cent over the past year.
A transfer of $135 million from the Growth and Financial Security Fund (GFSF) should keep the province in the black to the tune of just over $7 million.
"The GFSF is the province's rainy day account," Finance Minister Ken Krawetz said in a release. "It's there to buffer the province when extreme, unforeseen events arise, such as the global events affecting the potash price or expenses related to disaster assistance. However, we continue to project a healthy surplus on a summary basis."
Potash prices have been in flux since Uralkali, a Russian company that is the world's largest potash producer, broke away from an agreement with Belaruskali, throwing uncertainty into a market that had been highly predictable to that point. Uralkali recently signed a deal to export potash to China at a price of $305 per metric ton, a steep drop from last year's price of $400 per ton.
Troubles in the potash market have hit in Saskatchewan, with PotashCorp announcing in December that it was laying off over 400 employees in the province in response to slow demand and falling prices.
It's been a rough few months for potash producers and the governments, like Saskatchewan's, that depend on them, but there is a sense that the potash market may soon pick up again. A report from Minnesota-based Mosaic Co., which operates three potash mines in Saskatchewan, expressed optimism that the worst has passed.
"Customers believe a bottom in potash prices has been reached and are now exhibiting improved confidence in their buying decisions," Mosaic President and CEO Jim Prokopanko said in the company's fourth quarter earnings report.
Representatives of BHP Billiton, the mining giant developing the Jansen potash project, echoed those positive sentiments.
"We believe the outlook for potash is strong," Chris Ryder, Vice-President of Corporate Affairs for BHP Billiton Potash, said in an email. "We expect demand to increase by 2 to 3 per cent a year to 2030 as a growing population and rising incomes in emerging economies increase demand for agricultural production. We expect that in time the market balance will move from overcapacity to undersupply. Production at Jansen is several years away. Short-term price changes will not influence our analysis of the demand and supply fundamentals."
With potash such an important factor in the future growth of Humboldt and the surrounding area, many will be watching the global potash market closely to see if it rebounds as industry representatives expect.
