Mosaic to Idle Louisiana Operations to Cut Back Supply

- September 10th, 2019

Phosphate producer Mosaic announced it would idle its Louisiana operations to reduce production by approximately 500,000 tonnes.

In a list of strategic actions freshly launched by Mosaic (NYSE:MOS), the phosphate producer announced it would idle its Louisiana operations to reduce production by approximately 500,000 tonnes this year.

The decision to cut down production comes as supply growth over the last year has put weight on phosphate prices. Countries like Saudi Arabia and Morocco have expanded their production capacities for the commodity, in turn also boosting output and exports. As such, supply has begun to outweigh demand.

In a press release, Mosaic stated that it expects the reduced production to help accelerate the reduction of high phosphate fertilizer inventories. The company added that it anticipates a more balanced global supply-and-demand outlook in 2020.

“Phosphate prices have declined further through the summer, with excess imports continuing to enter the US on top of high channel inventories,” President and CEO Joc O’Rourke said in the release. “We expect our move to idle production to tighten supply and rebalance the market. Mosaic will prioritize shipments to meet key customer needs through the idling period.”

The idling of its Louisiana operations is set to go into effect as of October 1. The move comes about a month after the company announced it would be temporarily idling its Colonsay potash mine in Saskatchewan.

Colonsay was put on pause as the low-cost Esterhazy K3 potash accelerated its ramp-up; the mine produced 400,000 tonnes of ore year-to-date June 30, 2019. The decision was made because of an already abundant inventory, the boosted production from Esterhazy and Colonsay’s higher costs.

This came as one of the actions Mosaic was taking to reshape its business, another of which was the permanent closure of its Plant City phosphate facility in Florida.

Mosaic’s announcement on Monday also laid out plans to initiate US$250 million worth of stock repurchases. Additionally, the company’s Brazil-based business, Mosaic Fertilizantes, is taking actions to meet or exceed its previous synergy target of US$275 million this year.

The Brazilian business plans to drive an extra US$200 million in annual value by the end of 2022 through “ongoing business transformation efforts.”

As of 10:49 a.m. EDT in New York, Mosaic’s share price was up 4.21 percent and trading at US$21.03.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

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