Vancouver port strike hitting potash exports at crunch time for overseas farmers

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The strike at four British Columbia ports is putting more pressure on an already-stressed international potash shipping network, with overseas farmers potentially caught in the crosshair.

Nutrien Ltd NTR-T, The Mosaic Company and K+S Potash Canada operate large potash mines in Saskatchewan, and all rely heavily on shipping the agricultural commodity overseas from the West Coast.

Canpotex Ltd., which handles potash shipments for Saskatoon-based Nutrien Ltd. and Tampa-based Mosaic, sends 70 per cent of its international shipments through the Port of Vancouver, one of four facilities affected by the strike.

“The timing couldn’t be worse,” said Natashia Stinka, spokesperson for Canpotex in an e-mail to The Globe and Mail. “Shipments are time sensitive for crops’ growing seasons and our overseas markets are counting on Canpotex to reliably deliver the potash they need.”

About 7,400 members of The International Longshore & Warehouse Union Canada (ILWU) went on strike on Saturday at the Port of Vancouver and three smaller ports in the province, after failing to reach terms on a new collective agreement with management.

Canpotex has fewer options than in the past to divert shipments from Vancouver to other ports. Portland, Ore., its other major facility on the West Coast, was knocked out of potash service in May, after a structural failure with its conveyor system.

Nutrien chief executive Ken Seitz said at the time that repairing the damage would take months, and that Canpotex in the interim would look at sending the commodity to alternative ports.

“With the facility down in the Pacific Northwest, they’ve been rerouting volumes already, but having the port of Vancouver down because of the strike takes out one of those export valves,” said Steve Hansen, analyst with Raymond James Ltd.

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One of the last remaining options that Canpotex has at its disposal is sending its potash across the country to the port of Saint John. But the rail trip from mines in Saskatchewan is significantly longer and more expensive at 4,300 kilometres, than going west to Portland or Vancouver. It’s unclear how much extra slack Saint John had already picked up as a result of the outage in Portland. It’s also unclear whether Saint John can handle added capacity resulting from the B.C. strike.

Both Nutrien and Canpotex declined to provide any more details and would not grant interviews with executives.

Nutrien’s Mr. Seitz has acknowledged that a longer-term solution that might help alleviate port duress on the West Coast could be the construction of a new export terminal in the U.S. Gulf. Such a facility would also provide a more direct shipping route to Brazil, a major customer for Canpotex.

Canadian Pacific Kansas City Ltd., CP-N which is the carrier for most of the potash shipped from Nutrien’s mines, recently talked up the possibility of Port Arthur, Tex., as a candidate for the facility.

Analysts meanwhile are bullish that shipping from Texas could be beneficial for Nutrien.

“This might actually end up being a decent option going forward for South America, as shipment to Saint John, New Brunswick is relatively costly for both rail and ocean,” Joel Jackson, analyst with BMO Capital Markets, wrote in a note to clients in May.

As Canpotex grapples with challenges in getting Canadian potash shipped overseas, Nutrien continues to trudge through a difficult patch.

Despite worries over the potential for a global shortage of potash over the past 18 months, the market instead has wobbled.

In early 2022, Russia, the world’s second-largest potash producer was forced to slash international shipments after the imposition of sanctions in the wake of its invasion of Ukraine. Belarus, the third-biggest producer, had already been subject to sanctions before the war began. But production cuts ended up being short-lived, with both countries finding alternative routes to subvert the sanctions and finding willing buyers in places like China.

This year, with ample global supply on the market, Mr. Hansen says that large global buyers from southeast Asia, India and China are mostly sitting on the sidelines and biding their time.

“Behaviourally they watch potash prices go down every week, by a couple of dollars. And so they’re just waiting to buy at a lower price,” he said.

The price of Nutrien’s Toronto Stock Exchange-listed shares have fallen by 20 per cent this year.

Saskatchewan is the world’s largest producer of potash, providing approximately 37 per cent of global supply, according to the province’s mining association.