In an industry that often makes its living helping clients in crisis, it’s a pleasure to work for a client with integrity and foresight.
During my summer holiday, I couldn’t help but notice that the potash cartel BPC fell apart with the exodus of Russian producer Uralkali. Our client BHP Billiton has long argued that cartels are anti-competitive and unstable. Investment decisions should be based upon the long-term market outlook for potash.
Cartels only work if everybody plays by the rules. As soon as someone’s interests are served by exiting, the cartel falls apart. With China and India moving to nitrogen-based fertilizer, the Russians saw their production utilization fall by almost 50 per cent, and prices dropped 15 per cent. So Uralkali pulled the plug from the cartel and signed a deal directly with China.
Happily for Canada, BHP Billiton has been true to their philosophy by announcing that they’ll continue to invest in the development of the Jansen mine in Saskatchewan, even though the industry is going through a weak period. Yesterday, the company said that it would invest 2.6 billion for the next four years digging shafts at the Jansen site. Although the timing of the production is delayed until 2020, BHP Billiton remains committed to the project. It is also opening up the Jansen project to other investment partners.
Impeding the forces of the free market is like bucking the laws of Mother Nature. The wiser policy is almost always anticipating that artificial market forces will not endure. Canada is benefitting from the integrity of BHP Billiton’s consistent position. In an industry that is often criticized for not living up to its corporate social responsibility commitments, BHP Billiton is putting its money where its mouth is in increasing its commitment to Canada during difficult times.