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Potassium chloride: Stop taking it! The police have been called! Author/Source: China Fertilizer Network Date: 2020-06-12 Clicks: 5 Actually, this article was prepared before the signing of the large-scale potassium chloride contract; at that time, the signing of that contract kept getting delayed, and the stock levels in domestic ports had dropped to around 900,000 tons, a historical low. The author’s procrastination is truly detestable – it started without any hesitation, and that delay has continued to this day. Just over a month after the large contract was signed, the market price of potassium chloride dropped all the way to the lowest cost level after applying the discounts. Thank goodness, this topic is useful again. In this article, “breaking free” no longer means “dragging”; it refers to potassium chloride’s price falling below its apparent cost. “Alert” denotes that its price is about to drop to the lowest cost after accounting for rebates. It should be noted that as of now, the details related to these large contracts have not yet been fully clarified; we are merely trying to analyze them based on the generally consistent patterns from previous years. On April 30th not long ago, after a gap of 19 months and almost a year of delay, a major contract for the maritime import of new potassium chloride was finally signed. With a CIF price of $220 and an exchange rate of 7.1, the apparent cost of 62% pure potassium chloride at the port was approximately 1,880 yuan per ton (the same unit is used throughout). At that time, the market price was around 2,000 yuan per ton. As the spring market gradually comes to an end, demand in summer and autumn is weak. Meanwhile, goods held in bonded areas are being cleared through customs one after another, resulting in a total stock of 3.7 million tons in the port – essentially the highest level on record. With supply exceeding demand, room for cost reduction, and an unfavorable overall environment in the fertilizer market, coupled with cautious attitudes among downstream buyers, the price of potassium chloride has continued to fall, dropping well below its apparent cost and heading toward an even lower level. This is what is known as “getting it done in one step”. So what is the cost after the rebate? It’s actually hard to say. It’s not that the author is as \"humble\" as when writing about potassium sulfate in the previous article; rather, costs in our fertilizer industry are inherently complex and varied. First of all, what we usually calculate are the fixed costs such as dollar prices, exchange rates, import tariffs, value-added tax, lump-sum fees, and packaging costs; these do not include the variable costs associated with running a business, such as employee salaries and financial interest expenses ； Secondly, there are also various factors that change from time to time, such as exchange rates. The fluctuations in exchange rates have been quite significant in recent days; the dollar reached almost 7.19 against the yuan at its peak, while it was around 7.09 at its lowest point. Just this single factor can result in cost fluctuations of over 20 yuan. In fact, everyone can do these calculations, so downstream manufacturers have already made up their minds. It is said that once the price of 62% white potash at the ports drops to around 1,750 yuan, they will start making bulk purchases, which is what people refer to as \"buying at rock bottom prices\". According to statistics from Zhongfei Net, the current mainstream price of 62% white potash at ports is around 1,800 yuan; the price at which large manufacturers place bids for purchases is approximately 1,780 yuan. These prices are quite consistent and are already very close to the minimum level. It’s tough for importers! It’s been just over a month since the deal was signed; the market in this area hasn’t had time to stabilize yet, and already profits are turning negative. There’s also 3.5 million tons of stock in the port… For about two weeks now, both sides have been engaged in a battle over the price range of 1,750–1,800 yuan – downstream players want to buy at low prices, while importers want to retain some profit ； Meanwhile, the price of 62% pure potassium for border trade at 1,550 yuan has been accepted by local downstream users. The price of domestically produced 60% potassium, which was expected to drop significantly in June, has also remained stable for now… At this point, isn’t the \"alarm\" no longer only echoing in the minds of importers? Can we also hear some signs of change among downstream users? In short, although there is a large amount of stock in the ports, prices are already at historical lows. It’s still uncertain how much more supply will arrive in the future, and the exact scale of this excess stock isn’t clear either. So unless the overall economic situation continues to deteriorate, based solely on the conditions in the fertilizer market, there isn’t much room for further drops in potassium chloride prices. The normal risk coefficient is already very low, and it is within the bearing capacity of large downstream customers. Should such sentiment spread and the price reach 1,750 yuan, with large orders placed all at once, it would be natural for the price of potassium chloride to reach its bottom and even rebound. It’s easy to reach rock bottom, and it’s not difficult to rebound either, but whether a significant and sustained recovery, or a true improvement, can be achieved so easily is still uncertain. In previous years, the turning points occurred around November. After all, it’s currently the off-season; there is an ample supply, and competition still exists. So it’s possible that after reaching the bottom, prices will fluctuate a bit before remaining stable at that level. So, bottom-fishing is an exciting option for large investors; many small and medium-sized clients, especially traders, should act according to their own capabilities – it’s nice to just watch what’s going on, right? (Adu)