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Unhappy about the sharp rise in fertilizer prices? Two pictures will tell you! Author/Source: China Fertilizer Network Date: 2020-03-10 Clicks: 24 Strictly speaking, this rise in the price of potassium chloride has only lasted about two weeks so far, but in some areas the price increase has already exceeded 200 yuan per ton – a quite rapid pace indeed. Today, we will not discuss the reasons for price increases or future trends; instead, we will focus on two aspects of the current situation in the potash fertilizer market: one is the comparison between prices and costs, and the other is the changes in inventory levels at ports. Average price below cost: The market for potassium chloride was poor in 2019, with prices falling throughout the year, by approximately 360 yuan per ton in total. After suffering losses for over half a year, although prices have rebounded in the past month or so, the average price remains below the apparent cost; at one point it was even below the minimum cost level. At present, except for the large-grained potassium chloride in the Northeast market, which is seeing the strongest price increase, the prices of other types of potassium chloride in the remaining markets remain below their apparent cost. Port inventory is decreasing. The figure shown above represents only the regular port inventory and does not include the quantity of goods in bonded storage. An important reason why the price trend of potash fertilizers is not seen as positive is the large inventory in ports. Yet after all this time, no new large-scale contracts have been signed. Even if there is still a stock of 2 million tons of goods subject to duty exemption, what’s the use if they can’t be sold? Compared to the same period in recent years, the current level of conventional ports can no longer be considered \"high,\" especially when taking into account the changes in trends – there has been a steep decline over these four months, akin to a rollercoaster ride, which does seem quite concerning. On the one hand, based on experience in recent years, when the stock levels at ports remain below 2 million tons for an extended period, the price of potassium chloride either stays stable or rises; whereas when these stock levels are above 2 million tons, the price of potassium chloride generally falls. On the other hand, while the current stock levels in Hong Kong have dropped rapidly from very high levels to normal levels, this is only the surface aspect of the situation. What’s more noteworthy is that as one and a half years have passed since the last major contract was signed, imports of potassium chloride have decreased significantly since the fourth quarter of 2019. Moreover, the import figures cited by the customs include those under bonded storage; in reality, actual imports have dropped to almost zero levels starting from November 2019. In other words, although the stock levels in Hong Kong also tended to decline over the same periods in previous years, imports were available to replenish those stocks at that time; whereas now we are essentially depleting our resources without any replacement. According to Zhongfei Net, in the first half of those three years, the average monthly consumption from stockpiles at ports was 736,000 tons, while the average monthly import volume was 766,000 tons. At present, our regular stockpiles at ports amount to only 2 million tons; even if we do not take into account the domestic stockpiles, how long will that be sufficient? It’s not a conclusion of conclusions. The key to the future trend of potassium chloride lies in \"large-scale contracts\"; once new large-scale import contracts are signed and the stockpiles held in free zones are taken into account, the inventory of potassium chloride at ports will surge. New imports will follow shortly, and given that international market prices have been low for a long time, any rise in the price of potassium chloride will come to an end. But why is it called “a conclusion that is not a conclusion”? Because there’s really no way of knowing when large contracts will be signed! If things go fast, it might be in the next few days or weeks; if they go slow, it may have to wait until around mid-April, with some foreign media suggesting that it could even take until the third quarter. As mentioned at the beginning, this article does not discuss the reasons nor the future. Considering the data, experiences, and comparisons presented above, whether you are a seller or a buyer, or someone in a position of authority, it’s worth giving them some careful thought. (Adu)