Home » BHP’s Canadian Potash Deals: A Game Changer for Fertilizer Market

BHP’s Canadian Potash Deals: A Game Changer for Fertilizer Market

The mining giant has secured non-binding sales agreements for its potash production and ruled out acquiring Cobre Panama mine

by Victor Adetimilehin

BHP (BHP.AX), the world’s largest mining company, is set to shake up the global fertilizer market with its entry into potash production in Canada. The company has signed non-binding sales agreements with distributors for all of its potash output from both phases of the Jansen mine in Saskatchewan, which is expected to start production in late 2026.

Potash is a key nutrient for crops that enhances yield and quality. It is mainly produced by Canada, Belarus, and Russia, which control about 80% of the global market. BHP’s Jansen mine will add 4.35 million metric tons of potash annually in the first phase, and 8.5 million tons in the second phase, increasing global supply by roughly 10%.

BHP’s Chief Commercial Officer Ragnar Udd told Reuters that the company is confident in the long-term demand for potash, especially as the world faces the challenges of climate change, food security, and population growth. He said the company’s customers are “thrilled” to see a new reliable and stable source of potash from an industry leader.

BHP plans to sell potash to distributors, rather than directly to companies that re-sell the fertilizer to farmers, Udd said, without naming the companies. He said this strategy allows BHP to focus on its core strength of production while leveraging the existing distribution networks and relationships of its partners.

BHP will convert the tentative sales agreements into binding contracts within 12-18 months before production begins, Udd said. He declined to disclose the prices or volumes of the deals but said they are based on market conditions and reflect BHP’s competitive cost position.

BHP’s entry into potash is expected to put downward pressure on prices, which have been rising in recent years due to supply disruptions, sanctions, and strong demand. According to the World Bank, the average potash price was $375 per ton in 2023, up from $244 in 2020. The bank projects the price to decline to $360 in 2024 and $340 in 2025.

BHP’s rivals in the potash market include Nutrien (NTR.TO), Mosaic (MOS.N), Belaruskali, and Uralkali. Some analysts have warned that BHP’s entry could be “quite destructive” to the market balance and profitability of existing producers.

However, Udd said BHP is not looking to disrupt the market but to grow it by offering a high-quality product at a competitive price. He said BHP’s potash will help farmers improve their productivity and sustainability, as well as reduce greenhouse gas emissions from fertilizer use.

BHP, which is best known for mining iron ore, copper, nickel, and coal, is also not interested in expanding its portfolio with the acquisition of the Cobre Panama copper mine, one of the world’s largest open-pit mines. The mine, owned by First Quantum Minerals (FM.TO), was shut down in December 2023 after Panama’s Supreme Court ruled that its contract was unconstitutional.

Udd said BHP is always looking for opportunities, but the Cobre Panama situation is “best left for Panama and others”. He said BHP is focused on developing its copper projects, such as Spence in Chile and Oak Dam in Australia, as well as exploring for new deposits in Ecuador, Canada, and Peru.

BHP’s potash and copper ambitions reflect its strategy to invest in commodities that are essential for the transition to a low-carbon economy. The company has also committed to reducing its emissions by 30% by 2030 and achieving net-zero emissions by 2050.

BHP’s potash deals are a game changer for the fertilizer market, as they signal a new era of supply diversity, quality, and affordability. They also demonstrate BHP’s vision and leadership in the mining industry, as it seeks to create value for its shareholders, customers, and society.

Source: Reuters 


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