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March 20, 2013

Fertilizer Producer Vale Suspends Rio Colorado Project in Argentina

Fertilizer producer Vale is now reconsidering its options for potassium production since announcing that it would not complete work on its Rio Colorado project in Argentina. Last week, Vale suspended work on its Rio Colorado operation after investing US$ 2.2 billion on the project that was 45% complete.

The official reason given for the suspension was unfavorable economics and an uncertain political climate in Argentina. The project was expected to produce 4.3 million tons of potassium per year making Vale one of the major fertilizer producers in the world and it was expected to supply the majority of Brazil's potassium needs. What was unsaid in the statement issued by the company was the possibility that the project could be nationalized by President Kirchner of Argentina. Numerous companies in Argentina have been nationalized in recent years due to the need of the federal government to increase revenues.

Now that the Rio Colorado project has been suspended, Vale is anticipated to ramp up its other potassium operations in Sergipe, Brazil and in Saskatchewan, Canada.

Vale's Carnalita operation in the state of Sergipe in northeastern Brazil already produces 1.2 million tons of potassium chlorate per year and company officials feel production from the mine could be tripled. Vale currently leases a mine from Petrobras nearby where they produce 600,000 tons of potassium per year.

Nearly 70% of Brazil's fertilizer needs are imported and the federal government has set a goal of being self-sufficient in fertilizer production by the year 2020. Brazil'ss agricultural production has been increasing rapidly in recent years, but its fertilizer production has not been able to keep up with the domestic demand.