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Potassium Sulfate: Walking on a Tightrope at High Altitudes Author/Source: China Fertilizer Network Date: 2020-05-19 Clicks: 82 Is the market for potassium sulfate doing well? This question is not easy to answer. If we consider only the pricing, it has been dropping since news of the large contract being signed surfaced, and it continues to drop to this day ； Looking at the utilization rate, the Mannheim industry has seen an increase rather than a decline, reaching its highest level in nearly five years. What’s going on here? According to statistics from Zhongfei Net, the industry’s operating rate in Mannheim dropped to 39% in mid-February, reaching its lowest level in many years. This was due, on the one hand, to a bearish sentiment in the overall fertilizer market during the winter storage period, especially the expected sharp decline in prices for large-scale potassium chloride contracts, and on the other hand, to the impact of the pandemic. However, subsequent to the concentrated release of demand, the market situation improved significantly, and the industry’s operational rate rose rapidly; this can be considered the direct cause. From 2016 to 2018, the operational rate of the Mannheim industry fluctuated within the range of 50-70%, with no particularly notable performance. In contrast, 2019, during which the rate remained in the 50-60% range throughout the year, seemed rather sluggish; not to mention the 39% figure. As a result, once an opportunity arose, the operational rate of this industry showed a somewhat \"revengeful\" rebound. This is considered a minor contributing factor. On the one hand, market conditions have improved; on the other hand, the previously low levels of production activity, especially the extremely low levels during the recent period, have significantly reduced the inventory pressure on manufacturers in Mannheim. In fact, some of these manufacturers received orders for the entire season almost as soon as the spring market started up. Therefore, manufacturers can produce with confidence and work overtime, which can be considered an important reason. As for the root cause, the author believes it is profit. Although the high-end price of the by-product hydrochloric acid is not particularly high at present, its low-end price is no longer as low as it was in previous years. As the prices of hydrochloric acid produced as a by-product in markets across the country largely shed the label of being sold at a loss, and considering sulfuric acid, which has remained at low levels for a long time, along with the opportunity to sell products without any difficulties while potassium chloride prices were falling, production rates soared accordingly. In 3 months, it rose from 39% to 73% – amazing! On the surface, at present, the gross profit for potassium sulfate manufacturers in most areas can reach around 300 yuan per ton, while in some areas it can reach around 500 yuan per ton – a situation that has not been seen for a long time. It’s a pity that the overall fertilizer market remains in a downward trend, and potassium sulfate alone cannot sustain things. As the season naturally moves into its off-peak phase, the bearish sentiment regarding potassium chloride and the expectation of price drops further complicate sales. Under these circumstances, maintaining a high level of production activity seems like walking a tightrope. Whether it’s 500 or 300, it’s all becoming an illusion; the pressure on potassium sulfate manufacturers is increasing steadily. And the pressure isn’t just immediate, as production capacity is still increasing! It is expected that the potassium sulfate market will first go through a phase of maintaining production; it is still far from the point where prices (costs) need to be protected, and price cuts will continue. But at the moment, there isn’t much pressure on inventory levels, so price cuts are likely to be moderate. If we’re lucky, we might even see a turnaround, after all, Luo Potash is currently in its longest summer maintenance period ever; moreover, tobacco bidding is set to resume soon, and the export situation is fairly good... (Adu)