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Business Facts

We’re focused on digging deeper into the potash business, here are the basics:

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Potash Basics

Potash is a vital and replenishing agriculture fertilizer used worldwide to grow healthy crops

Potash is also used to make industrial products and pharmaceuticals

Canada has the largest and richest potash resources on the globe, and could supply the needs of farmers worldwide for several hundred years

Canada has approximately half the world’s potash reserves

Mined & Processed

How it’s Mined & Processed

The Canadian Potash Industry

There are 3 companies producing and selling potash in Canada as well as 8 greenfield projects in various stages in Saskatchewan

NUMBER OF MINES NUMBER OF MINES NUMBER OF MINES NUMBER OF MINES

Global Players Outside Canada

Russia

Exporters: Uralkali and Eurochem

Belarus

Exporters: Belaruskali

Israel

Exporters: ICL

Chile

Exporters: SQM

China

Source: CRU/IFA

Global Players Outside Canada

Global Potash Production

Big Impact
Where CDN Potash Goes

Where Canadian Potash Goes

95% is exported out of Canada Major markets: US, China, Brazil and India; 40 countries world-wide

Potash is transported both by the producers themselves and for some, through Canpotex (a joint venture owned by Mosaic and Nutrien)

The three main producers own or lease specialized railcars to move product through their own supply chains

Potash is moved by train and relies on the services of CN and CP Rail

Canpotex markets and delivers Canadian potash overseas through their fleet of 5,000 customized railcars to port terminal facilities in Portland, Oregon, Saint John and Vancouver

Rail cars are emptied into large containers and put on ocean-going vessels for global shipments

Journey of a Rail Car of Potash

The Cost to Produce Potash

Companies producing potash in Canada have the highest business costs in the world

New, unexpected costs can’t be passed along to the end user

Like any business or industry, companies selling Canadian potash are trying to lower costs to stay competitive

COST PER TONNE

COST PER TONNE COST PER TONNE MOBILE

1 British ton (long ton) = 1,016 kg or 2,240 lbs | 1 U.S. ton (short ton) = 907 kg or 2,000 lbs

Typically the cost of potash is calculated as the cost it takes to create one tonne of potash

COSTS INCLUDED

  • Labour
  • Materials
  • Power and utilities
  • Natural gas
  • Freight
  • Royalties and mineral rights
  • Potash Production Tax
  • Depreciation and amortization of things like equipment and buildings
Transportation Costs

In comparison to a Russian producer shipping overseas

Transportation Costs

Canadian potash has to move to either coast to get to global markets

Right now, it costs significantly less for a global producer to ship into the US than it does for a Canadian potash producer to move by rail within the same continent

transportation

Canadian Potash Tax Treatment

crown

Crown Royalty tax is paid to the Crown for removing the mineral and selling it. Calculated as value of potash produced (average selling price) x 3%

Base – producers estimate how much potash they will make in a year x 35% to a maximum and minimum; there are deductions available to incentivize new mine research and development along with market development to grow the industry – paid monthly

Profit tax – producers estimate how much they will make in a year x 15% or 35% (based on amount sold in a year); there are deductions to encourage companies to build or expand mines, create corporate office positions, and do market/research development – paid quarterly

Capital tax, Federal tax, Direct Carbon Tax, Indirect Carbon Tax, Provincial Tax, Provincial Sales Tax, Property Tax, Water Security Agency Fee

Tax Burden

It’s estimated that Russian potash companies pay 43% less as a percentage of operating earnings

It’s important for regulators to consider the collective impact many changes in different places have on overall cost compared to the competition

We know taxes and costs will increase and change over time — that’s a given

The goal should be to maximize the earning potential of the industry so Canadian producers are selling their potash and making more profit, so everyone’s share grows exponentially

 
money
Priced to Sell

Priced to Sell

COMMODITY

Potash is considered a commodity, meaning it is interchangeable with commodities of the same type and is used as an input to produce other goods – like crops that are used for food

NEGOTIATIONS

Potash companies around the world negotiate with buyers to set volumes and prices for potash, based on the current market conditions

CONTRACTS

Each growing cycle comes with contract negotiations with the largest world importers like China and India

PRICING

The price of potash is set by the market not the seller and is based on what a customer needs at that time with what’s most readily available

Priced to Sell potash

Price Factors

PRICE IS BASED PER TONNE

  • Supply:
    how much is available
  • Demand:
    how much is needed
  • Growing season and weather
  • Farmer disposable income
  • Government subsidies
  • Currency exchange rates
  • Tariffs and trade wars

POTASSIUM CHLORIDE PRICES

Vancouver F.O.B, standard, monthly, 2009 – 2018

chart

Environmental Footprint

More Canadian potash is better for the world

We won’t compromise on many of the ‘higher costs’ we pay, such as:

Paying well above minimum wage and offering good benefits

Working to reduce environmental impact

Hiring inclusively

Investing back in our people, communities and business

Attracting and keeping the best talent in Canada

Potash companies in Canada have made big, meaningful reductions and commitments to reduce their impact on the environment:

 
 
 
 

* GHG = Greenhouse Gas

70 fewer ghg emissions
Wheat

TIME TO DIG DEEPER

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WHY IT ALL MATTERS

Potash plays a major role in our economy. The facts are compelling. Dig in.

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