Fertilizer markets had been largely uneventful in 2024 with little volatility. Potassium noticed a 2 p.c year-over-year achieve to complete the yr at US$739 per metric ton, whereas potash sank 14 p.c to shut 2024 at US$444 per metric ton.
Given the escalating conflicts in Jap Europe and the Center East, delivery may have been a significant story in 2024. Nonetheless, most corporations altered routes shortly after the conflicts began in 2022 and 2023, respectively.
The opposite issue that would have impacted fertilizer costs in 2024 was the specter of strike motion by Canadian railway unions that loomed for a lot of the second and third quarters. Finally, staff had been locked out by Canadian Pacific Kansas Metropolis (TSX:CP,NYSE:CP) and Canadian Nationwide Railway (TSX:CNR,NYSE:CNI), however the Canadian authorities stepped in and ordered staff again to work.
Though final yr remained comparatively calm, the identical is probably not true for 2025. Donald Trump has threatened broad tariffs on all imports from Canada into america.
Moreover, solely one of many Canadian rail corporations signed a brand new collective bargaining settlement, leaving the door open to additional transportation disruptions between the US and Canada.
Influence of tariffs on fertilizers
One of many largest points going through the fertilizer sector in 2025 may very well be commerce tariffs imposed by the incoming Trump administration.
Throughout his marketing campaign, Trump was vocal about utilizing tariffs to stage commerce imbalances with different nations and infrequently singled out China. Nonetheless, in December, he started to suggest imposing 25 p.c tariffs on all items imported from Canada into the US.
Since he made the statements, there was no indication of any carve-outs for fertilizer provides. Canada is the world’s largest producer of potash, and any tariffs may upset the quantity traded to the US, resulting in increased costs downstream for farmers and the meals provide.
In an e-mail to the Investing Information Community, Josh Linville, vp of fertilizer at StoneX, defined that the US is closely reliant on imports from Canada and Russia, and tariffs on both can be felt instantly.
“Of the close to 15 million metric tons of potash imported to the US final yr, nearly 13 million of these originated from Canada… Russia, one other potential tariff goal for the incoming administration, accounted for 1.5 million metric tons final yr. Whereas the US does produce potash, it isn’t almost giant sufficient to fulfill our demand,” Linville stated.
He additionally outlined how reliant Canadian producers are on US ports to succeed in the remainder of the world, noting that 4.4 million metric tons had been exported. Even when Canadian potash isn’t being consumed in america, it’s nonetheless topic to tariffs when it crosses the border, making it costlier for the tip purchaser.
Phosphate can be prone to be affected by tariffs as effectively.
As Linville outlined, america and 4 different international locations are accountable for 85 to 90 p.c of the world’s phosphate provide. Trump positioned tariffs on China throughout his first time period in workplace, whereas Biden positioned Morocco and Russia below tariffs throughout his time within the White Home.
“That leaves Saudi Arabia because the lone wolf that may nonetheless goal the US unencumbered, they usually have loads of world consumers they’ll goal. Right now, we don’t anticipate this case to alter in 2025, which ought to preserve the US in line to barely increased than the remainder of the world,” Linville stated.
Ample potash provide, phosphate stays tight
The potash market in 2024 was comparatively quiet with greater than sufficient provide to fulfill demand. Barring any main developments, that situation is predicted to proceed by means of 2025.
“It is vitally exhausting to see an outlook that features a lot value appreciation within the potash sector. Whereas there have been some fears that provides can be reduce with the speech by Belarusian President floating manufacturing curtailments in response to low costs, no different main producers have been heard following his lead,” Linville stated.
It’s unsure whether or not that state of affairs will proceed previous 2025. New initiatives are within the pipeline, together with BHP’s (ASX:BHP,NYSE:BHP,LSE:BHP) C$14 billion Jansen potash mine, which is ready to return on-line in late 2026. As soon as accomplished, the operation will produce 8.5 million metric tons of potash yearly.
Linville additionally pointed to Russia, which is seeking to broaden its manufacturing. China has additionally been working to broaden its operations in Laos. Nonetheless, in early January, the Laotian authorities ordered the closure of a mine operated by Sino-Agri Worldwide Potash after sinkholes fashioned close by.
Whereas the potash market stays easy and secure, the phosphate market is extra dynamic.
China, which controls 30 p.c of the market, started issuing export quotas in the course of 2022 that had been effectively beneath the numbers seen in 2021.
The cuts got here at a time when main fertilizer costs had been close to file highs, together with phosphate, which was above US$1,000 per metric ton. The nation imposed additional restrictions on exports in 2023 and once more in 2024 as home costs didn’t stabilize.
Nonetheless, there are different elements impacting the availability and demand of phosphate.
“The federal government (was) sluggish to answer a altering market and stockpiles acquired near the degrees seen in late 2021 when the agricultural market rioted in response,” Linville stated.
The federal government responded shortly and has been a significant purchaser since, however Linville stated that stockpiles stay decrease than regular. In the meantime, manufacturing in america was hit by the twin influence of hurricanes Milton and Helene.
In contrast to potash, there is just one notable phosphate venture, the Eigersund venture in Rogaland, Norway. Owned by Norge Mining, a subsidiary of Nordic Mining (OL:NOM), the location hosts a major phosphate useful resource, alongside vanadium and titanium. Whether it is efficiently introduced on-line, manufacturing will nonetheless not begin on the web site for a number of years. When it does, the influence on the agriculture trade can be unsure, with Linville suspecting a lot of the phosphate can be destined for the battery trade.
Investor takeaway
In accordance with Linville, costs for potash are unlikely to see a lot change. “Right now, the 2025 outlook is extra of the identical. It is vitally exhausting to see an outlook that features a lot value appreciation within the sector,” he stated.
For phosphate, Linville paints an image that can be a continuation of 2024.
“The 2025 outlook continues to color phosphate at increased value ranges. We anticipate that Chinese language exports will proceed to be decrease than regular and world demand to look respectable. I cannot be shocked to see a seasonal summer time low on values, however any hope of seeing costs down considerably are exhausting to carry,” Linville stated.
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Securities Disclosure: I, Dean Belder, maintain no direct funding curiosity in any firm talked about on this article.
Editorial Disclosure: Hempalta is a shopper of the Investing Information Community. This text isn’t paid-for content material.
The Investing Information Community doesn’t assure the accuracy or thoroughness of the knowledge reported within the interviews it conducts. The opinions expressed in these interviews don’t mirror the opinions of the Investing Information Community and don’t represent funding recommendation. All readers are inspired to carry out their very own due diligence.
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