Sponsored by Oregon Business

An export to build on

| Print |  Email
Tuesday, January 04, 2011

By Michael Gurton

Day after day, rail cars full of a mysterious white powder, marketed by a cartel and desired by people all over the world, stream into Portland.  This powder, responsible for hundreds of local jobs and millions of dollars of revenue for local businesses, illustrates an important, if not often discussed, strength of our region’s economy.

The white powder is potassium sulfate (what were you thinking?), more commonly referred to as potash.  Potash is a water soluble form of potassium, one of the three primary plant nutrients, and is absolutely necessary to global agricultural production.  As population increases worldwide and developing nations’ diets change to more agriculturally intensive proteins like meat, farmers are forced to maintain higher and higher crop yields.  With limited land to grow crops, farmers must increase yields through the application of fertilizers like potash.

Beyond potash’s absolute necessity in crop production, there are several other factors compounding its importance on the world stage: potash’s highly capital-intensive extraction, its scarcity, and that the world’s largest reserves of recoverable potash reside largely in the province of Saskatchewan (Russia has the second largest reserves), an area hemmed in by the Canadian Rockies and over one thousand miles from the nearest port.

Handling the distribution and  inland transportation of Saskatachewan’s potash is a marketing cartel called Canpotex (short for “Canadian Potash Exporters”) composed of three North American potash exporters: Mosaic Corporation, Agrium and the world’s largest potash company, Potash Corporation.  Canpotex is charged with selling potash to markets outside of North America and has roughly 35% of international market share.

For Canpotex to serve its three largest customers, the nations of China, Brazil and India, they must transport the potash by rail to Western North American ports.  The primary route of Canpotex was through the Canadian Port of Vancouver, but rail strikes during the 1990s forced them to diversify their transport routes and, in 1997, Canpotex signed a 30-year lease for 100 acres at Terminal 5 at the Port of Portland. 

Over the last 13 years, Canpotex has spent almost $100 million on Terminal 5.  The terminal, built out of wood due to potash’s corrosive nature, is now the largest wooden structure West of the Mississippi.  Its contribution to the local economy is also large. According to Port of Portland spokesperson Josh Thomas, Canpotex’s operations have directly created around 100 jobs. He estimates the indirect creation of twice as many jobs via ancillary services, such as stevedoring and logistics. The port makes money from potash through leasing the facilities, a minimum volume agreement and reimbursement for maintenance.

Potash exports through Portland grew by 200 percent year from 2009 to 2010.

In November, Australian mining behemoth BHP Billiton made a $39B offer for Canada’s Potash Corporation.  The takeover bid was ultimately blocked by Canada’s Industry Minister after the Saskatchewan Premier successfully lobbied against it.  BHP Billiton’s failed bid will not deter it from developing potash reserves it previously owned in Saskatchewan and the company recently signed an agreement to develop 60 acres at the Port of Vancouver (WA).

The region’s interest to Canpotex and BHP Billiton points to the strategic importance that our region, and its rails and ports, play to natural resource extraction.  As Asian countries grow in population and economic might, their desire for potash and other natural resources will only increase and our region will be an important link in the natural resource chain.  As the region attempts to peer into the future for opportunities to grow out of the current economic downturn, we would be well served to examine how the growing worldwide demand for natural resources, those from Oregon itself and those that pass through Oregon, could benefit our economy.

Contributing blogger Michael Gurton is MarketLink program director of the Oregon Microenterprise Network.

Oregon Business magazinetitle-sponsored-links-02