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A serious discussion on the rise in the price of potassium chloride (Part 2) Author/Source: China Fertilizer Network Date: 2020-08-27 Clicks: 7 The article is divided into two parts; similarly, the rise in prices also has its own sequence of events. This round of rebound for potassium chloride seems to be entering its second half. As mentioned earlier, although price increases have some justification, speculation-driven price hikes are also partly due to a lack of real underlying support. So, which is stronger, the supporting factors or the negative factors in the potassium chloride market? The biggest factor supporting the potassium chloride market is its price itself; since it is currently at a historical low over the past fifteen years, this constitutes a natural advantage for the market. Although, in reality, whether looking at earlier historical experiences or the current market conditions, potassium chloride is not entirely free from the possibility of further price drops, the industry generally believes that the likelihood of such drops is low and the extent of such declines will be limited; as a result, those in the upstream sector can afford to take risks, while those in the downstream sector can also afford to gamble. If we are to be “very serious,” then of course we cannot focus only on these psychological factors. Whether prices rise or fall ultimately depends on supply and demand. According to statistics from Zhongfei Net, the actual production of potassium chloride in Qinghai in the first half of 2020 was approximately 3.3 million tons (in terms of physical volume; the same applies hereafter), which represents an increase of nearly 10% compared to the same period in 2019 ； Initially, it is estimated that the total annual production will reach at least 7.2–7.3 million tons; if necessary, it could even exceed 7.5 million tons. Customs figures show that China’s imports of potassium chloride from January to July amounted to 4.71 million tons, a 25% decrease on a year-on-year basis. It seems that a quarter of the amount has been reduced, which is quite alarming. The production increase on the above side is 10%, which amounts to only about 300,000 tons; meanwhile, production here has dropped by nearly 1.6 million tons, showing a clear decline in supply. Let’s take a look at the next few months. The average monthly potassium chloride import volume from August to December in the first four years was 595,000 tons ； In the previous two instances when record imports were recorded in the year before, followed by a significant drop in imports in the following year, the average monthly import volume for the period from August to December was 481,000 tons (in 2008, the average CIF price was nearly $600), and 640,000 tons (in 2016, which showed some similarities to this year, with the CIF price for large-scale contracts at $219). After all, the international market situation isn’t very good either; there’s no need to pay too much attention to the threatening statements made by foreign companies for now. Import volumes from August to December this year should at least not experience a historically significant decline. Therefore, it is preliminarily estimated that the annual import volume should reach at least 7 million tons, and in some cases it could even reach around 7.5 million tons. Looking at it this way, although the total annual imports will decrease significantly on a month-on-month basis, they will still be at around the average level of the past 10 years, so it’s not considered a small amount. Data from Zhongfei Net shows that by the end of 2019, the total stock of potassium chloride in Qinghai, along with the regular port stocks of potassium imported through ports, amounted to around 4.4 million tons. So, with \"440\" plus \"720-750\" and then plus \"700-750\", the total supply is expected to reach 18.6–19.4 million tons. Data from Zhongfei Net show that over the first five years, the total range of China’s apparent and actual consumption of potassium chloride was between 12.83 and 17.16 million tons, with the typical value falling within the 14–16 million ton range. On a calendar-year basis, the supply can be fully guaranteed ； The carried-over inventory will be around 4 million tons, which is also a relatively high level; at least this gives us some confidence in the face of threats from foreign competitors. The key here still lies in the international aspect. If international market conditions are good and prices rise, foreign suppliers will be more confident and may supply less goods ； Or similar to the recent events in Belarus – if they persist for a long time, or if other suppliers encounter similar issues later on due to reasons related to the pandemic, then our supply of goods will decrease. If international market conditions are poor and prices remain low or even drop further, foreign suppliers might increase their shipments, which could lead to a decline in domestic potassium chloride prices. But here we return to the aforementioned \"natural advantages\". After all, accidents don’t happen frequently, and a weak market trend is the current situation in the international market. Therefore, it is initially estimated that although the price of potassium chloride is likely to rise in the long term, the extent of that increase is probably not significant. Therefore, premature and excessive price increases constitute speculation-driven price hikes; just like this recent rebound, it is almost at its end now – there should be a proper correction, but ultimately the price should still be higher than the previous baseline level. Perhaps such episodes are a reflection of the price trend for potassium chloride in the coming period. (Adu)