Fertilizer markets were largely uneventful in 2024 with little volatility. Potassium saw a 2 percent year-over-year gain to finish the year at US$739 per metric ton, while potash sank 14 percent to close 2024 at US$444 per metric ton.
Given the escalating conflicts in Eastern Europe and the Middle East, shipping could have been a major story in 2024. However, most companies altered routes shortly after the conflicts started in 2022 and 2023, respectively.
The other factor that could have impacted fertilizer prices in 2024 was the threat of strike action by Canadian railway unions that loomed for much of the second and third quarters. Ultimately, workers were locked out by Canadian Pacific Kansas City (TSX:CP,NYSE:CP) and Canadian National Railway (TSX:CNR,NYSE:CNI), but the Canadian government stepped in and ordered workers back to work.
Although last year remained relatively calm, the same may not be true for 2025. Donald Trump has threatened broad tariffs on all imports from Canada into the United States.
Additionally, only one of the Canadian rail companies signed a new collective bargaining agreement, leaving the door open to further transportation disruptions between the US and Canada.
Impact of tariffs on fertilizers
One of the biggest issues facing the fertilizer sector in 2025 could be trade tariffs imposed by the incoming Trump administration.
During his campaign, Trump was vocal about using tariffs to level trade imbalances with other nations and often singled out China. However, in December, he began to propose imposing 25 percent tariffs on all goods imported from Canada into the US.
Since he made the statements, there has been no indication of any carve-outs for fertilizer supplies. Canada is the world’s largest producer of potash, and any tariffs could upset the amount traded to the US, leading to higher prices downstream for farmers and the food supply.
“Of the near 15 million metric tons of potash imported to the US last year, almost 13 million of those originated from Canada… Russia, another possible tariff target for the incoming administration, accounted for 1.5 million metric tons last year. While the US does produce potash, it is not nearly large enough to meet our demand,” Linville said.
He also outlined how reliant Canadian producers are on US ports to reach the rest of the world, noting that 4.4 million metric tons were exported. Even if Canadian potash isn’t being consumed in the United States, it is still subject to tariffs when it crosses the border, making it more expensive for the end buyer.
It’s not just tariffs on potash, phosphate is also likely to be affected as well.
As Linville outlined, the United States and four other countries are responsible for 85 to 90 percent of the world’s phosphate supply. Trump placed tariffs on China during his first term in office, while Biden placed Morocco and Russia under tariffs during his time in the White House.
“That leaves Saudi Arabia as the lone wolf that can still target the US unencumbered, and they have plenty of global buyers they can target. At this time, we do not expect this situation to change in 2025, which should keep the US in line to slightly higher than the rest of the world,” Linville said.
Ample potash supply, phosphate remains tight
The potash market in 2024 was relatively quiet with more than enough supply to meet demand. Barring any major developments, that scenario is expected to continue through 2025.
“It is very hard to see an outlook that includes much price appreciation in the potash sector. While there have been some fears that supplies would be cut with the speech by Belarusian President floating production curtailments in response to low prices, no other major manufacturers have been heard following his lead,” Linville said.
It is uncertain whether that situation will continue past 2025. New projects are in the pipeline, including BHP’s (OTC PINK:BHPLF,ASX:BHP) C$14 billion Jansen potash mine, which is set to come online in Late 2026. Once completed, the operation will produce 8.5 million metric tons of potash annually.
Linville also pointed to Russia, which is looking to expand its production. China has also been working to expand its operations in Laos. However, in early January, the Laotian government ordered the closure of a mine operated by Sino-Agri International Potash after sinkholes formed nearby.
While the potash market remains straightforward and stable, the phosphate market is more dynamic.
China, which controls 30 percent of the market, began issuing export quotas in the middle of 2022 that were well below the numbers seen in 2021.
The cuts came at a time when major fertilizer prices were near record highs, including phosphate, which was above US$1,000 per metric ton. The country imposed further restrictions on exports in 2023 and again in 2024 as domestic prices failed to stabilize.
However, there are other factors impacting the supply and demand of phosphate.
“The government [was] slow to respond to a changing market and stockpiles got close to the levels seen in late 2021 when the agricultural market rioted in response,” Linville said.
The government responded quickly and has been a major buyer since, but Linville said that stockpiles remain lower than normal. Meanwhile, production in the United States was impacted by the dual impact of hurricanes Milton and Helene.
Unlike potash, there is only one notable phosphate project, which Nordic Mining (OL:NOM) is developing in Rogaland, Norway. The site contains 70 billion metric tons of phosphate, but production will not start for several years. When it does, the impact will be uncertain, with Linville suspecting much will be destined for the battery industry.
Investor takeaway
According to Linville, prices for potash are unlikely to see much change. “Today, the 2025 outlook is more of the same. It is very hard to see an outlook that includes much price appreciation in the sector,” he said.
For phosphate, Linville paints a picture that is also a continuation of 2024.
“The 2025 outlook continues to paint phosphate at higher price levels. We expect that Chinese exports will continue to be lower than normal and global demand to look decent. I will not be surprised to see a seasonal summer low on values, but any hope of seeing prices down significantly are hard to hold,” Linville said.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.