Mosaic to idle production at Colonsay
North American producer Mosaic will temporarily idle potash production at its Colonsay, Saskatchewan, mine as the company focuses on heightened development of its Esterhazy K3 mine.
The company's low-cost Esterhazy K3 project in Saskatchewan has produced more than 400,000t of ore during the first six months of the year, which enabled Mosaic to curb production at the higher-cost Colonsay mine and is expected to reduce its overall production costs.
The temporary production cut allows Mosaic to utilize current inventories and Esterhazy production to meet orders in the near-term. Mosaic's inventories of all products swelled to 2.7mn t by the end of the quarter, up by 20pc from the same period a year ago and 6pc higher from first-quarter stocks.
Mosaic announced in 2008 an expansion program at its three Canadian mines to boost its nameplate potash capacity by 3mn t/yr. Development of Esterhazy is the final step and received approval in 2015 to accelerate development.
Mosaic's decision to idle production at Colonsay comes on the heels of the June closure of its 2mn t/yr Plant City, Florida, phosphates facility.
Mosaic's potash and phosphate sales volumes dipped during the second quarter as unfavorable weather crimped spring demand.
The producer sold 2.2mn t of potash during the three-month period, marking an 8pc reduction from the same period a year ago and under its 2.3mn-2.6mn t target publicized during the first quarter.
Higher average potash sales prices partially offset reduced sales volumes during the second quarter, resulting in a $569mn increase in sales revenue from the prior year to $599mn. Production costs dipped to $83/t, which helped increase the company's gross margin/t by 50pc to $84/t compared with the same period a year ago.
The company is aiming to sell 2.2mn-2.4mn t during the third quarter, with full-year sales estimates 300,000t lower from its first-quarter forecast at 8.7mn-9.1mn t. Mosaic's potash facilities are scheduled for third-quarter maintenance, which will affect operating rates.
Despite higher revenue in its potash segment, Mosaic reported a $233mn loss during the quarter on a sharp decline in phosphate sales revenue and accrued costs from its Plant City closure.
Mosaic's phosphate sales volumes slipped by 4pc to 2.2mn t compared with the prior year, shy of its 2.3mn-2.6mn t target.
Lower sales prices and volumes squeezed Mosaic's gross margin/t from the prior year, resulting in a 17pc drop in phosphates revenue to $917mn during the second quarter. Weather and logistics delays impacted sales volumes and prices during the three-month period, Mosaic said.
DAP and MAP spot barge prices dipped during the second quarter by 18pc year-over-year to average $318/st fob Nola and $316/st fob Nola, respectively, according to Argus data, as delayed demand weighed on suppliers to cut prices.
Additionally, the company accrued a $284mn charge for stopping operations at Plant City.
Mosaic aims to sell 2.2mn-2.4mn t of phosphates during the third quarter, and 8.4mn-8.8mn t for full-year 2019 — a reduction from its 8.6mn-9mn t/yr estimate made in the first quarter. Mosaic said a potentially shortened fall application window in North America and weaker demand in India and China could result in lower sales volumes from current estimates.
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