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A Season of Troubles: Fertilizer Markets Need Caution Author/Source: China Fertilizer Network Date: 2019-09-16 Clicks: 7 (China Fertilizer Network People often say that the best time of the year for planning is spring, but why not say it’s autumn? Seeding is important, but is harvesting not important then? It’s probably a problem similar to the question of whether the chicken came first or the egg… Well, anyway, we’re not here to discuss that. What the author wants to say is that the fertilizer market has been very turbulent these past two years, so everyone should be extra careful! Next, let’s take potassium fertilizers as the focus and give a few examples. First, environmental protection and safety supervision. With the implementation of the new environmental protection law in 2015, environmental protection became one of the top priorities during the 13th Five-Year Plan period. Against this backdrop, work safety supervision was also upgraded, and environmental protection along with work safety supervision have, unbeknownst to many, become important factors affecting the fertilizer market. Not long ago, potassium chloride production in the Qinghai region was affected to some extent; currently, manufacturers in Hebei, Shandong and other areas are also waiting to see what will happen. In fact, both upstream and downstream sectors are affected, though the duration and extent of the impact vary. Nevertheless, for those responsible for environmental protection and safety supervision, since shutting down or reducing production is not voluntary, it certainly has some negative consequences. To put it simply, who would willingly make clothes for someone else? Meanwhile, since there’s no other option, one tries to make the most of its light and heat output. And at some point, environmental protection and safety supervision once again became terms used by some manufacturers to drive up prices. Since it’s said to be a fabricated increase, it’s hard to say whether the price will actually rise; those in the supply chain who have been deceived might end up suffering as a result. Second, production capacity. One of the purposes of strict environmental inspections is to promote supply-side reforms and facilitate the healthy development of the industry. So far, its effects have been quite significant. In the potassium sulfate industry in Mannheim, several manufacturers have indeed been out of production in recent years, with little hope of resuming operations. However, most manufacturers continue to struggle to survive despite periods of operation and shutdown, and new production capacity is still entering the market. The current annual production capacity of potassium sulfate exceeds 6 million tons, of which Mannheim accounts for around 3.1 million tons. In contrast, China’s annual demand for potassium sulfate is only 3.5 to 4.5 million tons. Despite this, new projects using the Mannheim process continue to emerge, including some on a massive scale – for example, a 500,000-ton project is under construction in the Northeast, and another 480,000-ton project is in progress in South China. It is said that a project planned in Qinghai could have an output of over 1 million tons. It’s hard to imagine what the landscape of the potassium sulfate industry will become once this new production capacity is actually brought onto the market. It’s okay; it’s under construction, in phases! Third, imports and exports. Actually, at that time it was really hard to imagine why, after potassium fertilizer exports had been under control for so many years, such a sudden and complete ban was imposed. Not long ago, there were rumors in the market about some so-called \"sealing off\" of the market. Well, it’s useless to try to figure out many things; it’s better not to think about them. Things like when to conduct negotiations for large contracts, who should be in charge of those negotiations, and how to carry out those negotiations… Whether potash fertilizer should be exported, and how to export it in the best way… and so on. In short, there is a great deal of uncertainty in this regard. For example, potassium sulfate is currently available for use, but it’s not easy to obtain it; maybe it will be easier to get it tomorrow, or perhaps it won’t be available after all. It’s hard to say for sure. For now, none of these things are important; what’s most crucial at the moment is the large contract for potassium chloride imports, but there’s no news at all regarding it. However, I heard that India has already started working on it! Fourth, negative news and financial pressure for large enterprises. Was 2019 the year when negative news related to the leading fertilizer companies surged? It seems so. Speaking of financial pressure, it exists every year; it’s just that this year, coupled with so many negative news stories, it has made things particularly stressful. For the downstream parties, should they be happy that prices are so low that some companies are on the verge of going bankrupt, or should they worry about whether they will receive the goods after making the payments? And this is just one of the many problems. Fifth, economic frictions and climate disasters. With the former, you don’t know what to plant; it seems like you do know what to plant, but in the end you still plant the wrong thing. With the latter, it doesn’t matter what you plant – everything gets destroyed anyway. First there was \"Shaqima (Lichima)\", and then \"Lingling\" appeared. Typhoons have caused severe damage to agriculture in many areas; in many regions in the northeast, crops such as corn, rice, and soybeans have been affected. Some people think that food prices may rise and that fertilizer usage might increase. But compared to the reduced demand resulting from people losing their income and distributors running out of funds, which factor will prove to be more significant? The 13th Five-Year Plan has not yet come to an end; the negative trend in fertilizer usage has not yet been reversed, supply-side reforms are still in progress, the business-minded president continues to post on Twitter, and the big players are still waiting for replies from the courts… In short, given the turbulent situation in the fertilizer market right now, it’s best to be cautious! (Adu)