Potash fertilizer leader sees six consecutive price increases; is the market’s ‘rebel’ about to turn back?

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Potash fertilizer leader sees six consecutive price increases; is the market’s ‘rebel’ about to turn back? Author/Source: China Fertilizer Network Date: 2021-01-06 Clicks: 5 As Chinese people, we always prefer things that bring good luck. So let’s write about the rise in the price of potassium chloride – it’s Adu’s first article on potassium fertilizers in 2021 　　Before the New Year’s holiday, Yanchi Salt Lake Company issued a notice of price adjustment; in January, the delivery price of 60% of its potassium supply to agents and direct customers was increased by 30 yuan per ton, rising to 2050 yuan per ton. This move and its outcome are generally in line with market expectations. From August of last year to January this year, the price rose from 1,820 yuan to 2,050 yuan at present; Salt Lake Company has seen six consecutive price increases, for a total increase of 230 yuan, representing a rise of 12.6%. 　　In 2020, Salt Lake Company reduced its prices only once, in May, and that time the price dropped by 280 yuan from 2100 yuan to 1820 yuan. On the surface, these six consecutive increases now are not even as bad as that one major drop in the past! But the reality is not that simple. In the first four months of 2020, the price was indeed 2100 yuan; however, due to unfavorable market conditions, agents in the market were selling it at prices ranging from 2000 to 2050 yuan. In May, the price of this product in the lower-end market even dropped to around 1750 yuan, while currently the market price has risen back to around 2050 yuan. Therefore, the prices of the leading domestic potassium producers have basically returned to their levels before the sharp drop. 　　Imported potassium prices have also seen a sustained rebound following a sharp drop; currently, the price of powdered potassium at ports, when converted to its highest value, is equivalent to the price under the previous large-scale contract, which was 290 dollars per unit – exactly the same level as that price. So, is potassium chloride, this fertilizer rogue (with insufficient domestic production and reliance on imports), really going to \"return to its proper path\"? 　　After all, it has only returned to its original level for now, and market conditions turned sluggish again in December; therefore we need to take a closer look to see whether potassium chloride can continue to rise. 　　Let’s talk about costs first. As of now, there are no clear updates regarding negotiations for new large-scale contracts. Initially, it is estimated that such contracts are likely to be finalized in March, or possibly a bit later in April; it’s also possible that they could be signed suddenly in January, but the possibility of a later date is low. Based on current international market conditions, and assuming there are no errors in the timing estimates, the price of the new large-scale contract is likely to be below $270. As mentioned above, the current market price is equivalent to 290 dollars when converted to its highest level; moreover, there is an expectation of further appreciation of the RMB. Therefore, from a cost perspective, it can be assumed for now that the supporting force for potassium chloride prices is not strong. 　　Let’s talk about supply and demand again. In 2020, the carried-over inventory of potassium chloride was around 3.5 million tons. Another factor that cannot be ignored is the inventory held by the general public. Since the consumption of potassium chloride in 2020 exceeded 17 million tons, which is far above the normal level of demand over previous years, and given the market conditions, it seems that the figure of 17 million tons is actually higher than the actual consumption level. This implies that the inventory held by the general public might be quite large, estimated to be at least 500,000 tons higher than the normal level in previous years. It is expected that both the import volume of potassium chloride and the production volume of potassium produced in Qinghai in the first half of next year will reach around 3 million tons each. As a result, the total supply of potassium chloride in the first half of the year is expected to reach around 10 million tons, which is considered sufficient. However, the main demand in the first half of the year is concentrated in March and May, and it takes some time for domestic potassium production to recover gradually; therefore, ensuring an adequate supply depends on import volumes of potassium not being too low in the early stages. 　　Plans can’t keep up with the rapid changes; if analysts were always accurate, there would be no need for them. So we need to make predictions in a timely manner and adjust them as needed. Judging from the current market situation, the chances and potential for an increase in the price of potassium chloride are actually quite limited. But aside from the ever-changing dynamics of the market itself, the pandemic will also bring endless possibilities in the future. Those who are hoping for a price increase should keep an eye on whether large-scale contract negotiations will be concluded later, or whether import volumes will drop significantly in the first quarter! 　　(Adu)