Updates with 1 month delay on tariffs.
US president Donald Trump will allow a one month pause before imposing a 25pc tariff on non-energy imports — including potash — from Canada.
Trump signed executive orders on 1 February that will impose the levy on all US imports from Canada, although energy imports will have a lower 10pc tariff.
Plans for the tariffs were announced in November, when Trump won the US presidential election, but most market participants did not expect them to be implemented, or expected that potash could be exempt, given that the US relies heavily on Canadian product. Most sources believed that the threat of tariffs was largely a bargaining tool related to border security. US fertilizer industry association The Fertilizer Institute said last week that there was not enough certainty as to whether or not the tariffs would be implemented, but if enacted would be counter to Trump's promise during his election campaign to lower grocery prices. Following the issuing of the executive order, TFI said it is ready to collaborate with the Trump administration to spur fertilizer industry growth.
The US has limited domestic MOP production and over 80pc of its potash needs are sourced from Canada, around 9mn-10mn t/yr of MOP.
No other major potash import market relies so heavily on one source. The US also stopped taking MOP from Belarus in 2022 following sanctions, and the lack of Canadian MOP should only further limit supply options.
What does this mean for the US potash market?
The tariff will no doubt raise prices in the US. MOP prices at New Orleans (Nola) and across the Corn Belt have already edged higher in recent weeks because of concerns related to potential tariffs.
Nutrien increased its post-winter fill potash offers on 28 January by $25/st to $340/st fot across US midcontinent warehouses, while river terminals rose to $335/st fob. Granular MOP fob Nola values have also risen, from $255/st at the start of the year to $265/st on 30 January, compared with $322.50/st fob in January 2024.
Argus calculates that the tariff will add an average premium of around $60/t at the US-Canada border but it is uncertain how much of this cost will be passed onto the buyer, or how much will be swallowed by the producer.
Regardless, the higher cost of Canadian potash will likely significantly reduce the volume purchased from Canada and push US buyers to turn to alternative suppliers, which may be cheaper. But the US will not be able to replace all of the 9mn-10mn t/yr of potash that the country needs. Prices for imported MOP may also benefit from an uptick in the price of Canadian potash, as other suppliers may raise prices to narrow the premium that Canada holds, while ensuring that they still remain competitive.
For the upcoming spring application season in the US, there is likely to be limited effect as domestic supply is robust and suppliers have positioned stocks accordingly, but whether the tariff will still be in place when fall demand is anticipated is difficult to predict.
How will this affect Canadian exports?
If the US takes less potash from Canada, the country will have no option but to push more volume for offshore exports.
Canada exports around 22mn t/yr of MOP, the bulk of which is handled by Canpotex, which markets product from Nutrien and Mosaic. Germany-based K+S also exports MOP from its Bethune mine in Saskatchewan.
Canada typically exports around 11mn-12.5mn t/yr of MOP via Vancouver on the west coast, and Thunder Bay and Saint John's on the east coast. The maximum volume exported from these three ports in a year is around 14mn-15mn t. Another 3mn t can be moved via Portland in the US, which will be unaffected by the tariffs.
But the Canadian rail system has reduced capacity to switch to ports and the export infrastructure will likely see bottlenecks, especially as all commodities will be affected, not just potash, which means that all products will be seeking alternative markets other than the US, and the only other option is to export.
Higher pricing in the US could entice other suppliers to bring more to the US, diverting product away from key market Brazil. Potash suppliers often switch between the US and Brazil, depending on which market is paying a premium.
But most imports into the US come through Nola, which is far from the main MOP consuming regions further north in the Corn Belt.
It is clear that the US needs Canadian potash to meet typical US application levels, and that Canada needs the US as an outlet. There remains uncertainty over how long these tariffs will last and under what conditions they might be lifted. Although there appears to be a case for potash to receive an exemption from the executive order, nothing has been said to this effect by the Trump administration.
In response to Trump's tariff executive order, the Canadian government announced its own 25pc tariff on more than $100bn of US imports.
