Tuesday, June 8, 2010

BHP Billiton (NYSE:BHP) Major Potash Player

There hasn't been much noise or notice about the entry of BHP Billiton (NYSE:BHP) into the potash market, but that seems to be about to change as the reserve estimates for its potash mining project in Saskatchewan is huge, and will make them a force to be contended with in the global potash market for years into the future.

To add insult to injury to one of the major potash players, Potash Corp. (NYSE:POT), the project of BHP Billiton is located on the border of the Potash property named Lanigan. BHP's project is called Jansen.

Estimated reserves for BHP at Jansen are 3.37 billion tons of high quality potash, which includes over 25 percent potassium, the key ingredient which makes up potash.

Included with three other major potash mines currently under development, BHP is expected to produce over 20 million metric tons of potash annually, which would account for 40 percent of estimated global production in 2010.

To give an idea of how quickly that has happened, Potash Corp. produced 13 million metric tons in 2009. BHP has been at it for only about 2 years.

This would put them in the pricing drivers seat in regard to competitors and those they're supplying, which should be a big boost to the bottom line of the company.

Now it remains to be seen how the rest of the industry will respond to this major threat.

1 comment:

ksolutions said...

The plans by BHP are still contingent on the demand for potash being there,that according to experts, will have to be priced well above current levels. Recent price increases, even in the $400 range have met with significant resistance, cutting potash consumption dramatically. Potash corp and Mosaic have large expansions underway, but have mines shut down to curtail production. There is new solution mining technology available with 80% less CAPEX and OPEX that will allow someone to expand production and sales. Without some new thinking as to technology, the potash expansion could be very slow for many years.