Canadian MOP major Canpotex targets future demand with Brazil beachhead

LONDON (ICIS)–News of Canpotex’s newly-opened sales office in Brazil will turn heads amongst the globe’s muriate of potash (MOP) players, as the Canadian offshore marketing group further strengthens its position to supply the key potash-consuming agricultural powerhouse.

A multi-billion dollar industry, the global potash market is largely producer-controlled, and centred in just a few key producing nations, including Russia, Canada, Belarus, and Germany.

Canpotex handles offshore marketing for Saskatchewan potash producers Nutrien and Mosaic, and has been operating since 1972.

Brazil, meanwhile, cannot claim a burgeoning MOP industry of its own. In fact, despite being the world’s largest net exporter of agricultural products, the country imports 94% of its MOP from mines as far afield as 20,000km distant.

As such, with the majority of Brazil’s MOP suppliers based far from its shores, Canpotex’s in-country sales arm may allow the Canadian major to meet potential customers, smooth established relationships, and straighten supply lines faster than its distantly-headquartered rivals.

Canpotex also has the strength of a long-established trade route behind it, having exported 35m tonnes of potash to the nation since the company’s inception.

The move to set up domestically is also a savvy one in light of news in January that the nation’s former-largest MOP producer, Vale Fertilizantes, had sold its fertilizer division to US major Mosaic – removing a key competitor from the Brazilian domestic market.

Under a revised agreement, Mosaic bought Vale for $1.15bn in cash and 34.2m in shares.

Underlining the company’s thinking, Canpotex CEO Ken Seitz adds: “Brazil is among Canpotex’s most important markets, with almost a quarter of our potash destined for Brazilian customers.

“Our presence in Brazil will make it easier to stay close to our customers and work directly with distributors to support farmers. Our goal is to capitalise on expected growth in demand in Brazil and improve our position in this already competitive market environment.”

It is easy to see why Brazil is such a key market for the world’s MOP majors: Brazilian granular potash prices edged to $310/tonne CFR (cost and freight) in early April, and are likely to increase further as continued availability concerns, strong demand, and high international freight costs combine to keep producers bullish in their negotiations.

However, despite its soon-to-be-opened domestic beachhead, Canpotex is not the only company looking to capitalise on Brazil’s strengthening position as the world’s breadbasket.

Speaking to ICIS in February, Matt Simpson – CEO of start-up Brazil Potash – said his company’s plan to open a mine in the Amazon means the global majors will be unable to compete on price alone – including Canpotex, with its in-country sales office, but Canadian material.

“That’s where Autazes comes in,” said Simpson, referring to Brazil Potash’s Amazonian claim, which is estimated to contain 87m tonnes of proven material, and 161m tonnes of probable material.

“It’s frankly not possible for the majors to compete with us on price,” he added. “We will have the lowest cost to Brazilian farmers. They can’t get down to our level. In fact, our cost to mine, process, and deliver is less than the majors’ delivery costs alone.”

“Ours is a very disruptive project. The majors will have to sit up and pay attention,” Simpson added.

Perhaps, with its new in-country sales force, Canpotex is indeed “sitting up”.

Focus article by Andy Hemphill

Additional reporting by Mark Milam