Resource World Magazine

d e c e m b e r / j a n u a r y 2 0 1 6 www.resourceworld.com 17 duction at six of its Western Canadian mines for one week in July, August and September respectively. Contract prices, however, remain depressed due to the market oversupply and recently fell to a low of $88/tonne. That is down from $120/tonne a year ago. By comparison, met coal was trading at $330/tonne at the market peak in 2011. Dr. Neil Bristow of the H&W Worldwide Consulting Group told a coal industry conference in Vancouver recently that declining met coal imports into China are leading to oversupply and low prices. Major foreign exchange changes and cost cutting are just keeping met coal's head above water, but the overall position is not sustainable, he said. One potential game-changer is India, another major steel producer, said Joe Aldina, a New York-based coal cost ana- lyst with the UK consulting group, Wood MacKenzie. Aldina said that in his view the coal sector has reached the bottom of the cur- rent price cycle and will turnaround at some point. "But we're talking years, not months," he said. "It's going to be a slow process, because we don't see a lot of demand catalysts, so it's going to be reduc- tion in supply that causes a rebound.'' PoTASh Potash was an investor darling six years ago, based on logic that global population and income growth would drive up grain production. A surplus of potash min- ing capacity is set to grow even larger in coming years, weighing down the global industry while favoring low-cost eastern European producers over North American miners, who are sticking to a marketing strategy that risks falling behind the times. CRU analyst Paul Burnside has argued that the industry should price potash to move without getting into a price war. If it doesn't he warns that demand will con- tinue to stagnate and surpluses won't get used up. CRU's demand forecast is based on an assumption that demand will grow faster than it has in the last seven years. If it does not, the supply-demand gulf will grow even wider. Given weaker demand and a strong US dollar, potash prices have been falling rap- idly in the Midwest, Brazil and SE Asia. Potash Corp. of Saskatchewan, the world's leading producer, has been reduc- ing its market forecasts after its average realized potash price fell to $250/tonne in the third quarter, down from $284 in the first quarter. After Potash Corp. withdrew an US $8.7 billion proposal to negotiate a transaction with K+S AG of Germany in early October, 2015, BMO Nesbitt Burns Inc. analyst Joel Jackson said he is concerned that the stock could resume its creep lower as potash prices could continue to fall through the first quarter. SulfATe of PoTASh Sulfate of Potash (SOP) is a high grade potash fertilizer, containing two key nutrients, potassium and sulphur. Global consumption is currently around 5.5 mil- lion tonnes, meaning the total market is about one-tenth the size of the market for Muriate of Potash (MOP) (Potassium Chloride), the most widely used potassium fertilizer. CRU has predicted that the size of the SOP market will double to around 9.5 million tonnes by 2019. SOP trades at a wide premium to the MOP price due to the cost of production and tight supply situation. Toronto-based Potash Ridge Corp. was recently basing the economics of its Valleyfield SOP project to be located near Montréal, Québec, at $750/tonne. However, it noted that North America's only major producer – Compass Minerals of Overland Park, Kansas, – realized $815/ tonne for its production in the first quarter of 2015. DIAMoNDS Diamond prices are soft and continue to soften. Analysts say this is due to a discon- nect between the rough diamond side of the business and a clog in the retail mar- ket. "Diamonds are a luxury item and they

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