Potash`s biggest marketer marks 40 years in business

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CANPOTEX
Potash’s biggest marketer marks 40 years in business
NATIONAL MINING COMPETITION
NEW MINERAL PROCESSING PLANT
POTASH INDUSTRY UPDATE
Steve Dechka, President and CEO of Canpotex
Steve Dechka, President and CEO
Photo: Stuart Kasdorf Photographics
CANPOTEX:
POTASH’S
BIGGEST
MARKETER
Company marks 40 years in business in 2012
written by Penny Eaton
4
Saskatchewan Mining Journal
:
you live in Saskatchewan—and
even if you don’t—you know that
potash is a pretty big deal here. It’s
a source of jobs and revenues and pride
for our province. It’s also a major factor
in why Saskatchewan is well known in
other parts of the world. After all, our
province provides almost a third of the
world’s supply of potash.
And the company that brings our
potash to the world is Canpotex, the
marketing and logistics exporter wholly
owned by Saskatchewan’s producers:
Agrium, Mosaic, and PotashCorp.
If
WORKING TOGETHER
Canpotex is not involved in the
independent production decisions of its
shareholders, nor does it have any ability
to regulate or restrict potash supplies.
Their sole marketing focus is overseas
and their main objectives are to
maximize exports and efficiently serve
customers for the benefit of their
shareholders and the province of
Saskatchewan.
Canpotex buys potash from each of its
members to fulfill purchase agreements
with its global customers. Proportionally,
PotashCorp has supplied about 54 per
cent of the potash exported; Mosaic 37
per cent and Agrium nine per cent,
although amounts can vary each year.
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Scott Rudderham, Senior Vice President, Operations
6
Saskatchewan Mining Journal
Photo: Stuart Kasdorf Photographics
But isn’t it difficult for three companies
who are competitors with each other to
come together as partners to market their
product overseas?
Not really, says Steve Dechka,
Canpotex President and Chief Executive
Officer. “Canpotex’s members compete
with each other in the domestic markets
of Canada and the United States, but they
work cooperatively to benefit from the
efficiencies Canpotex brings to offshore
markets.”
“All three shareholders have an equal
ownership in the affairs of the company:
one member, one vote,” he explains.
“We’re able to enhance the offshore sales
and distribution capabilities of our
individual shareholders and customers by
sharing logistical assets and benefitting
from economies of scale.”
Something is obviously working. In
September 2012, Canpotex celebrated its
40th year in business by welcoming more
than 200 visitors from 28 different
countries to its home base in Saskatoon.
Canpotex employees proudly entertained
their guests at Wanuskewin Heritage
Park, the Western Development Museum
and took part in mine tours, the Premier’s
Golf Tournament, riverboat tours and a
gala dinner at the Delta Bessborough
Hotel.
“It was a tremendous opportunity to
share this important milestone with our
long-term customers, shareholders and
suppliers,” Dechka says. “We worked hard
for four decades to build and maintain a
reputation for quality, reliability and
service and are proud of how the focus on
this has translated into and supported the
long-term customer relationships that are
the envy of the market today.”
Some clients in Japan and China have
remained Canpotex customers for all 40
years, something Dechka credits to the
company’s long-standing appreciation for
other cultures. “Since commencement,
we have taken the time to better understand our customers and their local markets. We regularly visit our customers and
annually host customer visits to our
Canadian Canpotex offices and North
American facilities.”
While their commitment to service
has never wavered, there have certainly
been other changes since Canpotex came
into being in 1972.
The company began with 12 members
and its head office in Toronto. Today,
Canpotex employs 113 staff in five
different offices in Vancouver, Singapore,
Hong Kong, Tokyo and the head office in
Saskatoon. With divisions in finance,
administration,
corporate
affairs,
planning and development and a sales
and marketing branch to serve their
global customer base, Canpotex also has
an extensive operations group to manage
their network of mine sites, railways,
terminals and ocean transportation.
“
using 11 per cent of its arable land. Brazil
has its own growing population to feed
while its soils also need to produce sugar,
ethanol, coffee and fruit for China and
other burgeoning markets. Meanwhile, in
Indonesia and Malaysia, demand for
more potash is being driven by the need
to grow more crude palm oil for both
food markets and the production of
biodiesel.
“Canpotex is well-positioned to grow
our business as world potash demand
We worked hard for four decades to build and
maintain a reputation for quality, reliability and
service and are proud of how the focus on this
has translated into and supported the long-term
customer relationships that are the envy of the
market today.
“Throughout the years, we have had a
well-educated and trained staff. We
employ a highly knowledgeable senior
marketing team with an average of 25
years of international marketing
experience,” Dechka notes.
SERVING INTERNATIONAL MARKETS
Canpotex is the world’s largest exporter
of potash, with sales in the range of seven
to 10 million tonnes every year. Since
beginning operations in 1972, Canpotex
has delivered approximately 185 million
tonnes to 135 customers in 60 countries.
The five largest markets for the
company—with approximately 106 million tonnes to these areas alone—are
China, Brazil, India, Indonesia and
Malaysia.
This is good news, as all of these
regions continue to grow in population
and economic activity with a corresponding need for more potash to fuel
increased food and industrial production. Population growth alone in China is
expected to require a doubling or even
tripling of current food production in
order to meet demand in the next 20
years. In India, their challenge is to feed
17 per cent of the world’s population
”
increases,” Dechka says. “Historically,
potash demand has not followed a
straight line, but has trended upward.
This inclined demand is largely due to
global food needs. Since our global population continues to increase, the
demand for potash is also expected to
rise.”
Canpotex offers its customers more
than 20 grades of potash to choose from.
Its nearest competitor offers just six.
That’s one of the advantages Canpotex
provides its customers, says Scott
Rudderham, Senior Vice President,
Operations. The company takes the time
to work closely with buyers to understand their production processes and to
ensure the product meets their needs.
“Canpotex prides itself on our
reputation as a reliable supplier of highquality Saskatchewan product. We have
varying grades of high-quality potash
that we consistently deliver on schedule,”
he says, explaining that the grades fall
into three general categories. Standardgrade potash is suitable for direct
fertilizer application and used in many
nitrogen-phosphorus-potassium fertilizer
formulations. Granular grades are also
suited to direct fertilizer application and
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7
can be used in bulk blending, which is
becoming increasingly popular. Industrialgrade potash is highly purified and is
used as a raw material in specific industrial applications, like cars, consumer
electronics, computers, pharmaceuticals
and textiles.
To ensure consistently high quality,
Canpotex operates numerous testing
facilities at potash mine sites and loading
ports where samples are measured
against industry standards for particle
size, colour and content levels for
potassium oxide and sodium chloride.
LINKS IN THE SUPPLY CHAIN
It is no easy task to transport millions of
tonnes of potash from mine to terminal
and then to more than a hundred different
ports in 30 different countries.
In Canada, Canpotex’s inland railcar
network winds through more than 1,600
kilometres of rugged terrain and severe
climate challenges to reach its export
terminals on the west coast. To better
accommodate this journey, the company
has a fleet of almost 5,000 railcars custom-designed to handle the bulk density
of potash and allow for longer 170-railcar
trains.
“Our specialized railcar design has
resulted in a 65 per cent increase in
operating capacity since 2000,” Rudderham observes.
He points out that it is the partnerships with Canadian Pacific Railway and
Canadian National Railway in Canada
and with Union Pacific Railroad in the
US that help make the whole system
efficient. “Canpotex recently signed 10year agreements with CP Rail, CN Rail,
and UP Railroad; these agreements will
help secure the needed transportation for
increasing export volumes. With longterm customers in approximately 30
countries, a reliable and properly
maintained railcar fleet is essential, and
these types of partnerships will help us
achieve present and future logistics goals.”
And as demand for potash increases,
Canpotex will need to plan for more and
larger volumes of product through its
network of inland railcars, west coast terminals and fleet of ocean vessels.
“Our ambitious logistics are challenging.
We have several capital projects underway, and it is a lot of hard work to make
our big dreams a reality,” says Dechka.
This fall, Canpotex completed construction of a new Railcar Maintenance
and Staging Facility located 12 kilometres
southwest of Lanigan, SK. The $60-million project will provide all-weather
inspection and light repair, automated
railcar wash and wheel maintenance
services for Canpotex’s dedicated railcar
fleet. It will support the massive potash
mine expansions taking place in the
province and enhance rail performance and
reliability.
Canpotex is partnering with Procor
Limited for operation of the facility, and
Railserve Inc. for railcar switching
activities. The new facility will employ 20
full-time staff in the area.
The new railcar facility will boost efficiencies all along the supply chain at the
same time as it provides a boost to the
local community. “We are proud that our
investment in this facility will help serve
“
million metric tons,” Rudderham
explains, noting that in 2007, an expansion
at the Portland terminal helped to
increase storage capacity at that facility.
“It is important that Canpotex’s supply
chain logistics capacity continues to grow
in order to keep pace with the expected
growth of Saskatchewan’s potash industry
and to meet growing global demand for
food,” he points out.
The company is studying the feasibility
of further expanding its Portland
terminal facility to increase throughput
capacity for forecast sales increases. As
well, Canpotex is contemplating building
a new greenfield terminal on BC’s west
coast at Prince Rupert, a project that
would provide approximately 750,000
labour hours during construction and
would employ about 50 full-time staff
once fully operational.
“That project is estimated to cost
Our ambitious logistics are challenging. We have
several capital projects underway, and it is a lot of
hard work to make our big dreams a reality.
our offshore customers while creating
opportunities here at home.”
It’s only one of the projects on the
horizon for Canpotex.
Currently, Canpotex has two terminal
facilities on Canada’s west coast. Neptune
Bulk Terminals, located at the Port of
Vancouver, is a joint venture between
Canpotex, Teck Coal and Bunge Canada
that handles almost 70 per cent of the
company’s potash shipments. Meanwhile,
Canpotex’s wholly-owned Portland Bulk
Terminals in Portland, Oregon handles
the bulk of Canpotex’s specialty-grade
potash.
In the last five years, Canpotex has
completed expansion projects at both
terminals. “The upgrade to Vancouver’s
Neptune Terminal enhanced the facility’s
rail, conveyor and material handling
systems and boosted throughput capacity
by two million metric tons to nearly 11.5
”
approximately $750 million and, if
approved, would give us three separate
gateways and three separate rail lines
to the west coast,” Steve Dechka
observes.
In addition, Canpotex manages more
than 225 ocean vessel voyages per year,
making approximately 600 port calls to
over 80 ports worldwide. Approximately
95 per cent of Canpotex’s potash sales are
currently made on a cost and freight
(CFR) basis, which means Canpotex hires
and manages the vessel through to the
port of discharge. To minimize the
impact of a volatile ocean freight market,
Canpotex’s ocean transportation strategy
includes vessel arrangements under longterm charters or joint ventures.
Canpotex has in excess of US $1 billion
in forward vessel commitments, which
include 17 new vessels to be delivered by
2014 through various joint ventures.
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LONG-TERM TREND: UPWARD
With growth in the forecast for Canpotex
customers and expansions underway, the
future certainly looks bright for the
marketing and logistics company. Yet as
those in Saskatchewan and elsewhere in
the potash trade know well, the global
marketplace is volatile and sometimes
cruel to the unprepared.
Canpotex’s President and CEO
remains confident that it is the long-term
upward trend that will prevail.
“Our company is not immune to
broader market factors, and that was
evident during recent years,” he says. “In
2007 and 2008, Canpotex experienced
record sales with approximately 9.3
million tonnes in each year. But in 2009—
amidst a global economic downturn—
our sales dropped to 3.2 million tonnes,
the lowest they had been since 1982. And
yet, in the following two years, 2010 and
2011, our sales were right back up again.
In fact, in 2011, Canpotex had record
sales of 9.85 million tonnes and gross
revenues totalling $4.5 billion. In 2012,
demand was slower but is expected to
increase again in 2013.”
The bottom line, he says, is that
regardless of the ups and downs in the
market, potash will still be needed to help
grow the food the world needs.
“Despite volatility in sales volumes, we
remain highly confident that global
potash demand will continue to trend
upwards, as it has throughout our 40-year
history, due to our world’s increasing
demand for food.”
To help producers in other parts of the
world learn how fertilizers can increase
their production, Canpotex is working
with the International Plant Nutrition
Institute to develop grassroots education
programs. Initiatives include demonstration
plots, farmer meetings, crop seminars,
retailer training, promotional literature,
soil testing, software and database
development and radio programming
about the benefits of balancing nitrogen,
phosphates, and potash in the proper
ratios. Initially based only in China in the
early 1980s, the program has since
expanded to incorporate farmers in Asia,
Latin America, and Oceania.
While the company’s focus is necessarily
international, Canpotex never forgets
where home is. Almost 80 per cent of its
staff work here in Saskatchewan and say
it’s a privilege to market our province to
the world.
Developing specialized potash railcars
and building a new railcar facility near
Lanigan are both examples of Canpotex’s
investment in its rail network. The
company has also made a commitment to
a smaller-scale railway in Saskatoon. “We
are excited to sponsor the rejuvenation of
the Kinsmen Park children’s train,”
Dechka smiles. “The train is scheduled to
be operational in the summer of 2014,
and I am sure that many Saskatoon
children will enjoy their first ride on the
new train.”
It’s another way Canpotex is investing
in Saskatchewan’s success, both at home
and abroad.
“We will continue to play an
important role in helping meet global
potash demand, presenting a significant
opportunity for producers – particularly
in Canada – with the ability to increase
export capabilities,” Dechka promises.
SMJ
Saskatchewan Mining Journal
11
Growing Relationships.
Investing in Saskatchewan.
At Canpotex, we invested approximately $60 million in the
Lanigan-based Railcar Facility, ensuring that our 5,000
railcars are efficiently maintained for the safe and timely
transportation of Saskatchewan’s potash to global markets.
As the world’s premier potash exporter, we are proud to
help overseas farmers increase their food production while
creating opportunities here at home.
S A S K ATO O N VA N C O U V E R S I N G A P O R E H O N G KO N G TO K YO
www.canpotex.com