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1620 If there is a cycle in Fei City? Author/Source: China Fertilizer Network Date: 2020-08-14 Clicks: 2 If there is a cycle, will the potassium chloride market in 2020, which shares many similarities with the trends in 2016, see a sharp rise in the near future? The author is also curious, so let’s study it together. One of the similarities is that the prices of large marine import contracts have all dropped sharply from high levels in the early stage to historic lows. The large-scale potassium chloride contract for 2016 was signed in mid-July at a CIF price of $219 per ton, which was $96 lower than the price in the previous large-scale contract ； The large-scale contract for 2020 was signed at the end of April, with a CIF price of $220 per ton – a drop of $70 compared to the previous contract – and only $1 higher than the price in 2016. The second similarity is that import volumes in the previous year all reached record highs. In 2015, the import volume of potassium chloride reached 9.43 million tons, setting a record high in terms of imports ； In 2019, imports of potassium chloride also reached 9.08 million tons, ranking as the third highest figure on record, second only to 9.43 million tons in 2015 and 9.41 million tons in 2007. Third similarity: prices have been on a downward trend for most of the first half of the year. In 2016, the price of potassium chloride dropped almost continuously from January until mid-October; the mainstream price for 62% pure potassium at ports fell from 2,200 yuan per ton to 1,750 yuan per ton, a decrease of 450 yuan ； In 2020, the price of potassium chloride also experienced only slight fluctuations at the beginning of the year; thereafter it declined generally from the start of the year until the end of July. The mainstream price for 62% pure potassium chloride at ports dropped from 2,220 yuan per ton to 1,820 yuan per ton, a decrease of 400 yuan. The fourth similarity is that, after prices reach their bottom, the market has certain conditions for a rebound. In mid-October 2016, potassium chloride saw a price rebound; by the end of the year, the premium price for 62% pure potassium chloride at ports had reached 2,100 yuan per ton. In other words, its price increased by more than 300 yuan in just over two months. The reasons for this include: first, long-term expectations of an oversupply meant that the industry failed to notice the temporary change in supply and demand dynamics; second, prolonged losses and a period of inactivity led sellers to be eager to regain profits; third, the overall economic situation contributed to this trend, such as the sharp rise in prices of urea due to its low production levels. The potassium chloride market is currently in a similar situation, and as we enter August, the price of potassium chloride at ports has also risen by around 30–50 yuan per ton. Firstly, although the total stock levels in Hong Kong remain high, many importers say that the supply of calcium carbonate and red granular potassium is relatively limited, so they are restricting new orders ； Secondly, after the large-scale contract for potassium chloride was signed at the end of April, its price dropped rapidly to near the minimum cost level; taking into account factors such as financial costs and storage expenses at the port, the sellers faced immense pressure ； Third, from a broader perspective, there are positive prospects for the future: for example, fertilizer prices are generally low, even at historical lows; downstream producers have limited inventory levels; and the importance of grain is increasing. On a more immediate scale, there is also urea, which was initially expected to see declining prices but has seen a sudden sharp rise driven by exports. That said, although the timing doesn’t quite add up, is the potassium chloride market really about to cycle again? Is this rebound in potassium chloride really going to be unstoppable? This year, it happened two months earlier than in 2016. Does this mean that the price increase this year might be even more pronounced? Don’t rush; let’s continue our research. First, let’s continue to act on this \"superstition\" for now. After seeing all these similarities, those who are hoping for price increases shouldn’t get too excited just yet. If there really is a cycle of price changes, it isn’t necessarily something good – after all, although potassium chloride prices rose by over 300 yuan between mid-October 2016 and the end of that year, they then dropped by about 200 yuan over several consecutive months. Secondly, one must drink the “Meng Po Soup”. In fact, the current market situation in 2020 differs significantly from that in 2016; assets that rose earlier this year may not necessarily see even stronger gains, or they might not rise at all. When potassium chloride prices rebounded in 2016, the supply was really quite limited. That year, the annual fluctuations in port inventories (including bonded inventories; same hereinafter) ranged from 1.4 million to 3 million tons, with the inventory level at around 2.2 million tons during the price rebound ； Currently, even though the supplies of white potash and large-grained potash are relatively scarce, the total inventory in ports remains at around 3.4 million tons. Since the beginning of the year, this figure has fluctuated between 3.3 million and 4.4 million tons; it is indeed gradually decreasing, but it is still significantly higher compared to the same period last year. The international market conditions are unfavorable. Following the signing of major contracts in China, only prices in Brazil saw a notable increase; in other regions, prices have been gradually declining or remaining stagnant. Currently, it seems that the Brazilian market has also reached its peak, with bearish expectations emerging locally. Overall, international potash chloride prices remain at relatively low levels, with no particularly significant price differentials. Furthermore, it is understood that in the first half of this year, exports from potash producers such as Canada and Belarus saw a decline in volume, which also confirms the current state of somewhat weak overall demand. Some say that foreign suppliers have made it clear they won’t provide additional volumes to our country; major contracts will be renegotiated after October. As a result, there is upward pressure on prices. Obviously, based on the current market situation, this doesn’t seem to hold true. Of course, it is still necessary to continue monitoring changes in international market supply and demand as well as price trends; this is also the main aspect that needs attention in the potassium fertilizer market going forward. Due to time and space constraints, I will stop here for now. In summary, I am actually optimistic about the future market trends, but only cautiously so. I am not particularly optimistic about the recent slight increase in prices; I suggest that small and medium-sized traders who have inventory should treat this as an opportunity to clear their stock and get cash back. Factories that have an urgent need for those products should purchase accordingly, while others should opt to wait and observe first. (Adu)