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The fertilizer market isn’t “peaceful”—have you heard the rumors? Author/Source: China Fertilizer Network Date: October 25, 2019 Click-through rate: 7 As an analyst with ideals and ambitions, yet forced to succumb to the demands regarding click-through rates, I must frankly explain the title of this article: Recently, there have been many rumors surrounding the potassium chloride market. How many of these have you heard, and how much do you believe? Alright, those concerned about potash fertilizer, please stay; everyone else, go back to what you were doing! As a mature, conscientious, and serious analyst, is it appropriate to be so playful at the beginning? Actually, I just want to give you a more intuitive sense of how many rumors there have been lately regarding the potassium chloride market – they’re countless and extremely frustrating. They’ve driven even good people to the brink of madness! Basically, everything revolves around the big Indian contract. At first, there were sudden reports that a major contract with India had been signed; the price was $30 lower than the previous year’s level (per ton, same hereinafter), meaning the new landed price was $260. Holy crap! It’s important! Should India indeed see its price drop to $260, it would mean that although no major contracts have been negotiated yet in our country, the basic pricing framework is now taking shape. Why do I say that? No explanation needed; see the image below. If the price of large-scale contracts in our country also drops to $260, and all other factors remain unchanged, then, excluding traders’ profits, the apparent cost of 62% white potassium at ports would decrease to 2,191 yuan (at an exchange rate of 7.1). After accounting for expedited shipment rebates, the minimum cost would be approximately 2,035 yuan. Currently, the prevailing quotes for 62% white potassium at ports range from 2,250 to 2,280 yuan. Even for large orders of over 1,000 tons of bagged products, the transaction prices remain above 2,200 yuan. In other words, once it is confirmed that the price in India will be reduced by $30, the cost support for domestic potassium chloride will weaken. Against the backdrop of a poor overall environment in the fertilizer market, this could very likely lead to a further decline in the price of potassium chloride. To prevent being assassinated… well, that probably won’t happen. But to avoid getting criticized, I’d better explain a few more things. There’s a key qualifying phrase in the aforementioned costs that everyone should not overlook: “excluding traders’ profits”” ； Additionally, although historically we have always secured contracts at prices no higher than those in India, looking at the trend over time, the price gap between the two countries has been gradually narrowing. Should it take too long for us to finalize major contracts, and if international market conditions were to improve, there is a non-zero chance that we might end up signing such contracts at prices higher than those in India—a situation that would be unprecedented in our history ； Furthermore, if the major contracts are delayed for a long time, and in the event that domestic potassium production declines significantly or market demand suddenly surges, the impact of costs will be rapidly diminished. In other words, even if costs decrease, prices may not necessarily follow suit and decline as well. But in the end, I’ll daringly add one more thing: the above explanations are actually quite weak and ineffective, at least in the period leading up to the signing of major contracts in India. However, no matter how thorough the analysis is, rumors remain just rumors. We still haven’t seen any official reports, either domestically or internationally, confirming that the major contract with India has been signed. Some people wonder if the higher-ups are suppressing the information? Are you kidding me? Even if we wanted to, would those international potash suppliers who are eager to secure big contracts in order to stabilize the spot market be willing to wait? So, we waited and hoped, and then... there were rumors that the big contract with India was indeed signed this time, but the price was reduced by only $10! Well, what if it’s true? Although this possibility is even more unlikely than the previous one, it’s better to be safe than sorry. If the landed cost is merely $280, and all other factors remain unchanged, then, excluding traders’ profits, the apparent cost of 62% white potassium at ports would drop to 2,348 yuan. After accounting for expedited shipment rebates, the minimum cost would be approximately 2,191 yuan. So, I guess many people will breathe a sigh of relief, right? On one hand, cost pressures have actually turned into a stabilizing factor; the pressure on port inventories will be alleviated to some extent ； On the other hand, the negotiations for the major contract are still ongoing; in fact, we haven’t lost the chance to secure it at a lower price. If that’s really the case, please send me the “Good Indian” card! But it’s all nonsense. Whether it’s $30 or $10, or even $20, $40, or that so-called “miraculous” price increase of $60—countless rumors have circulated, yet they remain nothing but rumors to this day. Moreover, although the domestic potassium chloride market has been constantly affected by these rumors, it’s mainly the sellers who are impacted; most buyers have remained unfazed. This is not only a dilemma for potassium fertilizers; it is also a predicament faced by the overall fertilizer market at present. Therefore, regardless of whether the rumors are true or not, and no matter what the final outcome of India’s major contract is, through the analysis in this article, everyone should have a general idea of the possible impacts. In fact, purely from a cost perspective, sellers are already in a rather pitiful situation. The key factor determining the trend of fertilizer prices this winter and next spring remains supply and demand. Logically speaking, there’s been little activity downstream at the moment; it’s possible that this sluggishness will persist even before the Lunar New Year. Yet crops must still be planted and fertilizers still need to be used. Therefore, after the New Year, market demand might see a sudden surge. At that point, if factors such as weather, logistics, and environmental regulations once again hinder supply, will the much-anticipated “spring effect” actually occur? So, take a close look at the supply and demand situation; there’s no need to worry too much about costs! (Adu)