Saturday, November 06, 2010

On the whole, not good news...

For potash prices.  The "conservative" government in Canada steps back from free-trade rhetoric to old-fashioned protectionism.  I suspect this same tendency abides in our right-wing.  Free trade is a good deal for industries in another guy's district/state.
This is the second time the Conservative government rejected a significant foreign takeover. In 2008, the Conservatives cited national security concerns when it rejected a proposal by Minnesota-based Alliant Techsystems to acquire MacDonald Dettwiler and Associates (MDA), the maker of the Canadarm.

At a media conference with his cabinet, Mr. Wall said the decision demonstrated that Canada could still be a free-market, open-trading economy while saying no to certain foreign investments that involve so-called “strategic resources.”

“We are open to foreign investment, open to takeovers, but there may be strategic considerations that we will take into account,” Mr. Wall said. “I think we have struck the right balance. And maybe Canada has entered a new phase in terms in terms of how we look at these deals.”  [More]
The effect on potash prices would have been felt via the loose cartel that sorta controls world potash trade, CANPOTEX. It was expected BHP would run this business like engineers rather than supply-control economists.
BHP Billiton’s planned $40bn (€31bn) takeover of Canada’s Potash Corp of Saskatchewan (PotashCorp) will likely put an end to the Canpotex export group, thus changing the way potash is marketed and priced on global markets, Canadian analysts said on Thursday.
Canpotex has marketed and distributed potash from Canada's Saskatchewan province to overseas buyers since 1972. Its potash sales are 8m-9m tonnes/year, according to Canpotex.
Jacob Bout, an analyst with CIBC bank, said that if 
BHP Billiton were successful, it would likely want to go it alone, rather than sell through Canpotex.With the loss of its largest member, Canpotex, which also includes Agrium and Mosaic, would come to an end, he said.
Mario Maselli, market strategist for Chicago-based futures trading firm Lind-Waldock told Canadian business television that BHP was keen on making its own mark in potash, after an earlier attempt to merge with mining firm Rio Tinto failed. 
The analysts' comments came after BHP chief executive Marius Kloppers said earlier that his company’s strategy was to run its assets throughout the cycle, in good times and bad times, and that it preferred to market itself to its customers. [More]
The worst part of this broken deal is the emboldening effect it will likely have on other governments, especially those who pay even less lip service to free trade. If good guys like Canada can invoke national interest, so can we could become a common refrain.

BHP may not be done. As yet, they have not responded.  This could even be a simple ploy to bump up the bid or get a different deal on taxes. I'll keep and eye on this, but sadly, with corn prices rising, the thinking at CANPOTEX is to squeeze the market, I'll wager.

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