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Low profits make it hard to sell in large quantities; potassium sulfate industry faces challenges. Author/Source: China Fertilizer Network Date: 12-30-2019 Clicks: 6 Apart from a slight increase in prices by some Mannheim manufacturers in the middle of the year, it can be said that potassium sulfate prices declined from the beginning to the end of the year; this trend was even more evident when considering the price dynamics of potassium sulfate within the water-salt system. According to Zhongfei Net, at the beginning of the year the prevailing ex-factory price in China for 52% fully water-soluble potassium sulfate in powder form was around 3,050–3,100 yuan per ton; it has now dropped to around 2,750–2,800 yuan per ton, a decrease of 300 yuan per ton, or about 10%. However, this is just the surface figure – as market conditions have been poor in recent months, manufacturers are offering much larger discounts than usual. Therefore, the actual price drop could be as much as nearly 14% (400 yuan per ton). As prices fall, the profit margins for potassium sulfate manufacturers are also gradually shrinking. Based on normal calculations, so far, except in markets such as Northeast China and Guangdong where the selling price of the by-product hydrochloric acid is high, manufacturers in most provinces have already achieved zero profits, while in some areas profits are even negative. Even in regions such as the Northeast, considering factors such as the operation rate, changes in the prices of primary and secondary products, and interest costs, there may actually be little left over. Although the cost of potassium sulfate in the water-salt system is much lower, the decline in price essentially means a reduction in profits, and the extent of this reduction is naturally not much different. In the business world, one often hears the saying \"sell more at lower profits.\" However, while the profits from potassium sulfate are indeed low, or even non-existent, sales performance is not satisfactory. By the end of the year, aside from a few manufacturers whose inventory levels had decreased compared to the same period last year, most manufacturers faced increased inventory pressure to varying degrees. This year, in the potassium sulfate market, it’s easy to achieve low profits but difficult to increase sales volumes, which has really worried countless manufacturers! In the author’s view, the main cause of this situation is the conflict between fluctuating demand and capacity expansion, followed by the impact of secondary product price trends. In recent years, China’s annual physical consumption of potassium sulfate has been around 4 million tons, although this figure fluctuates significantly, by up to about 10%. Yet, production capacity continues to expand; the period 2014–2015 was particularly notable in this regard. Currently, China’s potassium sulfate production capacity is more than 2 million tons higher than before, representing an increase of over 40%! The overall fertilizer market performed poorly in 2019, and potassium sulfate already had large inventories from the end of 2018, which further exacerbated the supply-demand imbalance. At the same time, the price of hydrochloric acid, a by-product whose sales had been severely depressed in previous years, improved and returned to normal levels in most areas except for a few, which prevented the production capacity of potassium sulfate manufacturers in Mannheim from dropping significantly. This further exacerbated the aforementioned contradictions and led to an increase in price wars. Under these two factors, the potassium sulfate market gradually fell into a vicious cycle, resulting in low profits and low sales volumes. Although we see some production capacity being phased out, there are still many plans for expansion and new construction. Meanwhile, the growth in potassium sulfate consumption seems to have reached a bottleneck; as a result, it is likely that the potassium sulfate market will not experience the strong performance it used to have in the coming years. Exports represent a breakthrough point, and the upgrading of by-products is another one; however, it is also very important to find ways to control production capacity. It is also hoped that potassium sulfate manufacturers will reflect deeply on their situation and find a better path for development as soon as possible. (Adu)