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Potash Corp. CEO vows to resist price reductions

Potash Corp’s new CEO, Jochen Tilk

Potash Corp. of Saskatchewan Inc.'s new chief executive officer is adamant that his company will not resort to further price cuts to increase market share after the breakup of the Russian-Belarus potash cartel sent the crop nutrient plunging.

The sharp drop in fertilizer prices underpinned Potash Corp.'s weak performance last year and threw into question the Canadian company's strategy of pursuing price over volume.

But Potash Corp. CEO, Jochen Tilk, affirmed his company's commitment to its tactics.

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"We are not deviating at this moment because something just happened," Mr. Tilk said in a phone interview from Saskatchewan. "I can tell you that there will be consistency on adhering to that strategy."

The bulk of the potash market used to be dominated by two main groups: the Russian-Belarus cartel and its North American counterpart called Canpotex, which includes Potash Corp and two other producers.

Since the crop nutrient is not traded publicly, the five producers had an oligopoly over the fertilizer industry and were able to control prices.

But last year, Russia's Uralkali killed the arrangement it had with its Belarus rival in order to sell more potash globally and gain a larger share of the market.

Now Uralkali, under new management, appears to be reversing course and cut its production forecast for 2014 – a move expected to help prop up prices.

Mr. Tilk, the former CEO of Inmet Mining Corp., started his new job at the Saskatchewan-based miner July 1. He has no experience in the potash world, a place where Potash Corp.'s previous CEO Bill Doyle played an outsized role in marketing the crop nutrient to fast-growing economies like India and China.

So far, Mr. Tilk, who started his mining career digging for coal in his home country of Germany, has signalled no break from the past. Only five days on the job, Mr. Tilk said it is too soon to identify potential change, if any, at Potash Corp. But he said: "I have seldom come across an operation where there aren't opportunities of efficiencies and effiencies generally translate into improved operating costs."

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Mr. Tilk is taking over as Potash Corp. and the other big producers are dealing with the same lacklustre demand, weak prices and a number of new competitors, including Anglo-Australia's BHP Billiton and Germany's K+S AG.

Potash lost a third of its value last year, although the commodity has recovered slightly to about $350 (U.S.) a tonne. Canpotex and Uralkali have already agreed to take a 24-per-cent cut in potash prices when it negotiated deals to supply the fertilizer to China earlier this year.

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About the Author
Economics Reporter

Rachelle Younglai is The Globe and Mail's economics reporter. More

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