Thread Content
Will potassium chloride, which saw a decline from 6 to 7, turn from falling to rising? Author/Source: China Fertilizer Network Date: 2019-07-01 Clicks: 45 The average price of potassium chloride dropped by about 200 yuan in the first half of the year, with imported potassium experiencing the biggest decline; its price has now fallen below the apparent import cost level. Such a situation is certainly dire, if not outright catastrophic. Now that the first half of the year is coming to an end, the second half is about to begin. Can the price of potassium chloride, which is seeing a decline at the end of June and the start of July, turn from falling to rising? Some rumors about price increases: Border trade came to a halt collectively in June, and as of now, no monthly import orders have been placed for July either; there are rumors that this pause may continue. In the early period, due to weak demand and fierce price competition, the price of potassium chloride in the border trade market kept falling, resulting in heavy losses for importers. Although it is now the off-season, prices have indeed rebounded following the suspension of imports in June, thus stopping the downward trend. Over the years, imports have only been suspended in June, with recovery occurring by July. Therefore, if suspensions continue in July this year, it is likely to have an impact on the attitudes of those in related markets; prices offered by importers, as well as the prices of certain inventory goods and potassium chloride at the Bayuquan Port, could rise. The new policies for domestic salt bridge potassium in July have not yet been announced. Rumors suggest that the pricing will remain unchanged, but the discounts will be reduced; in other words, there could be an indirect price increase, with the amount said to possibly range from 50 to 100 yuan. On the one hand, when the policy was introduced in June, it was said that prices were already at their lowest for the year; therefore, a rise in July is a normal reaction as a way to fulfill those commitments and build confidence among agents ； On the other hand, with a large number of orders pending execution, it is not that important at the moment whether price increases are accepted or not. So, be patient and wait for the new pricing policy in July; a price increase is indeed a high-probability outcome. Main pressures on the potassium chloride market: 4.83 million tons of potassium chloride were imported from January to May, setting a new record for that period; currently, the total stock of potassium chloride in ports is estimated to be over 2.8 million tons ； Meanwhile, in the first half of the year, potassium chloride production in Qinghai continued to decline; leading enterprises reduced their production significantly, while smaller factories remained shut. From the above, two conclusions can be drawn: first, demand has decreased significantly ； Second, the pressure on inventory in Hong Kong is too high. As a result, even though negotiations for large-scale contracts may be a long way off, the situation of oversupply in the domestic market is unlikely to change in the near term. On top of that, the international price of potassium chloride is not favorable either, with prices gradually falling in some regions In the previous two years, the market was often subject to various speculative drives for price increases, but so far this year there have been no major movements. What does the caution on the part of those in power imply? Where are the opportunities for a turnaround in the market? First, there is a rapid and significant decrease in import volumes. Second, it is difficult to restore domestic potassium production. Third, the international market situation has reversed. Fourth, domestic demand has shown a clear increase. The above points do not follow any specific order, and the impact of each one when present alone is limited; it is only when two or more of them occur simultaneously that the price of potassium chloride can shift from falling to rising. Based on the current situation, the international market conditions are poor. Suppliers have been advocating for opportunities to raise prices throughout the first half of the year; now they are instead trying to prevent prices from falling. Meanwhile, production capacity and output continue to increase steadily, with no reduction in supply – unless some major unexpected event occurs – so the likelihood of a reversal in the international market trends is low. As for a significant recovery in domestic demand, the possibility of this happening seems low for now; the current prices of various fertilizers are not particularly impressive. It appears that compound fertilizer manufacturers in the autumn market will continue to focus on producing best-selling products. Moreover, the impact of extreme weather conditions cannot be ignored, as it may pose constraints on the production, transportation, and distribution of fertilizers. As for the other two points, it’s pretty certain that domestic potassium production won’t be able to recover. However, when international market conditions are poor, suppliers are more inclined to ship goods to China in order to alleviate their own pressures; therefore, it seems unlikely that import volumes will decline rapidly and significantly. And even if there is a decrease, there is still a large amount of stock in the ports, so it will take some time before any effects become apparent. Therefore, overall, Adu believes that the situation for potassium chloride is unlikely to see a real improvement in the short term. In regions such as those surrounding border trade areas and inland areas where domestic potassium is produced, it is necessary to give more consideration to issues related to supply security and price fluctuations. For manufacturers located near ports as well as most traders who intend to take advantage of low prices for speculative purposes, it is better to remain cautious for now; there may not be much room for decline in the future, the risks are not high, and improvement is not impossible, but it is unlikely to happen quickly. (Adu)