It’s July again, eagerly awaiting a big contract

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It’s July once again; we eagerly await the signing of major contracts. Author/Source: China Fertilizer Network. Date: July 2, 2019. Click-through rate: 3. In the previous three years, the negotiations for major sea shipment contracts regarding potassium chloride were concluded in July, July, and September respectively. Therefore, as July arrives, it’s only natural to pay extra attention to the signing of such contracts. Yet despite the anticipation, the length of this article is bound to be short, as, driven by this longing for a resolution, the author does not expect such a large contract to be signed any time soon. Let’s talk about it briefly below. 　　Data from China Fertilizer Network shows that in the three years prior, when large-scale contracts were signed, the total domestic port inventory of potassium chloride remained at around 1.5–1.7 million tons. Moreover, in the month leading up to each contract signing, the inventory level had already dropped significantly to near this figure. And what about now? About 2.9 million tons! In the industry, many have been waiting for the large contracts previously in place to be completed, expecting import volumes to decline, but instead, the amount keeps increasing as they wait! How to sign it? 　　Logically, if the price is set at over $290, the costs increase; and if prices in the domestic market rise as well, then there’s a good chance of making a profit from all those goods in stock at the ports! But with so much stock available in Hong Kong, the market is already ‘congested’, and there are no significant positive signs in domestic demand – how can prices rise? With no expectation of price increases in the domestic market and no shortage of supply, how could one dare to accept price hikes from foreign suppliers? 　　Well then, push down hard and sign for $280, or $270, or even less... With lower costs, selling at a lower price should be easier, right? But with so much inventory in Hong Kong and such a poor market condition, what if costs decrease, forcing prices to drop even further? In particular, what should be done with that nearly 3 million tons of inventory that has become costly to maintain? 　　Therefore, if the inventory in Hong Kong doesn’t decrease, how can we sign the contract? Why the rush? 　　Some might object: with such a large stock available, that is, so many chips, isn’t this an opportunity to use them to negotiate with foreigners in order to drive down prices as much as possible, thus benefiting the domestic market? Putting aside notions like “business is business” or “healthy development”, at the very least, foreigners aren’t stupid! We’ve already reduced the price for China so quickly – what about India and Brazil? What about Southeast Asia? What to do with all that newly built capacity? 　　So overall, \"delaying\" is the best approach, as accepted by both domestic and international negotiating parties, to deal with the current market situation when no other solution is available. Either wait until port inventories decrease, or until demand improves; or wait until international prices rise or another accident occurs... Given that port inventories are currently around 2.9 million tons, and considering the current state of both the international and domestic markets, this “waiting period” will probably be quite long, right? ! 　　It is unlikely that large contracts will be signed in July or August; at the earliest, we have to wait until September, and it’s very possible that it will be pushed back until after November. Moreover, if import volumes do not decline in the third quarter, there is a high possibility of a \"gap\" occurring in 2019! With such expectations, there is basically no need for speculation in the domestic market; everything can only be left to time to work its way through. It is expected that the overall market situation is unlikely to improve in the short term; only in certain regions and for specific products might there be some fluctuations. In the past, there have been individual cases that ultimately affected the overall situation; if such individual cases arise in the future, we will thoroughly examine whether a turnaround is possible! 　(Adu)