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The Contrasting Situation in the Fertilizer Market: Strong producers at the upstream end, emaciated companies at the downstream end Author/Source: China Fertilizer Network Date: 2021-04-23 Clicks: 1 Not all contrasts are cute; the fertilizer market has seen various such contrasts over the past few months, and these contrasts aren’t cute at all – they’re quite severe. In general, the producers at the upstream end have become very profitable, while many companies at the downstream end have been reduced to a state of extreme weakness. Shut up! Don’t talk about what happened in history; if we keep going down this path, we’ll end up discussing how the universe was created! To be honest, potassium chloride is in abundant supply these days, while potassium sulfate is struggling to find its way on the market – that’s how cruel it is. The latest customs data show that China’s potassium chloride imports in the first quarter amounted to 2.56 million tons, a surge of nearly 20% on a year-on-year basis ； The average import volume in the first quarter of the first 10 years was around 2.1 million tons, and this year’s figure ranks fourth ； The average import price over time was 224 US dollars per ton, which translates to a cost of around 1,720 yuan per ton. The average selling price for all potassium imports in the first quarter was approximately 2,050 yuan per ton. It is evident that importers enjoyed a great success in the first quarter, with both volume and prices rising. If the average price isn’t clear or compelling enough, let’s be more specific: currently, the mainstream price at 62% purity talc ports is around 2,550 yuan per ton, while its apparent cost is only about 1,740 yuan per ton. So, huh? Let’s take a look at Mannheim potassium sulfate now. Taking Shandong, a key region, as an example, the incoming price of 62% calcium carbonate at ports is around 2,600 yuan per ton, the incoming price of sulfuric acid is about 600 yuan per ton, and the outgoing price of the by-product hydrochloric acid is around 80 yuan per ton (with a slight increase recently). Based on these figures, the production cost for 50% calcium carbonate at the outlet is very close to 3,000 yuan per ton. It is understood that sales of potassium sulfate across various regions have been rather poor recently. In Shandong province, the current official selling price for 52% fully water-soluble powdered potassium sulfate is 3100–3150 yuan per ton; however, the actual transaction prices were around 3000–3050 yuan per ton in the earlier period. Recently, due to high cost pressures, some manufacturers have reduced their production volume, which has led to an increase in the intended transaction prices by 50 yuan per ton. Pay close attention: one is a 50% powder, and the other is a 52% fully water-soluble powder… Of course, both potassium chloride and sulfuric acid have seen their prices rise sharply from low levels in the early stages to current high levels. Most manufacturers of potassium sulfate either have stockpiles of raw materials from earlier periods or possess other advantages, but their costs and sales pressures have still increased significantly. Moreover, the situation in the future market is challenging; it’s difficult to make decisions, whether it comes to setting prices for sales or purchasing raw materials. In April, the upward trend in potassium chloride prices weakened significantly; however, port prices remained high for now. Lower-grade potassium used in border trade and domestically produced potassium continued to rise in price, or were set to do so. Currently, there are two main forecasts in the industry regarding short-term market trends over the next one or two months: one is that prices will remain stagnant, while the other suggests a possible slight decline; for now, the first view holds precedence. Its main argument is as follows: First, the terms of the large contracts remain uncertain; if we insist on maintaining the price of $247 agreed upon with Belarus, delivery volumes in the future could decrease significantly given the current conditions in the international market ； Secondly, the price of potassium chloride in the international spot market continues to rise. When comparing it with prices at the high-end level, they are now roughly equal; the gap at the low-end level is not significant either. It is said that the sales plans of the main suppliers of potassium chloride are already full for the first three quarters, so the upward trend in international prices is likely to continue ； Third, this year the domestic supply capacity of potassium is insufficient ； Fourth, the Russian side in border trade markets demands significantly higher prices; importers, in an effort to avoid risks, may once again suspend imports ； Fifth, the price of potassium chloride as a single nutrient remains relatively lower than that of urea and diammonium phosphate; meanwhile, the prices of urea and diammonium phosphate have been rising recently. The market situation has not shown a definite downward trend at the end of the spring planting season, even though fertilizer prices are high ； Finally, the international political and economic environment is full of uncertainties, with the threat of inflation persisting for a long time. The reasons why a slight decline is expected are as follows: First, the price of potassium chloride has been rising sharply over a long period, and even based on current international prices, the cost basis is not sufficient to support higher prices ； Secondly, the market conditions for potassium sulfate, potassium nitrate, and compound fertilizers downstream are generally not favorable; some companies are on the verge of incurring losses, and there has been a downward trend in production rates ； Third, at least in the first quarter, the overall supply of potassium chloride did not decrease significantly; imports increased by 400,000 tons on a year-on-year basis. The production and sales volume of domestically produced potassium also declined only slightly, but inventory levels from the previous year dropped considerably, resulting in a reduction of over 600,000 tons in the total supply of domestically produced potassium. During the peak season earlier on, there were many orders for compound fertilizers, and the operating rate of Mannheim potassium sulfate plants remained high. Fear of price increases also led to an increase in inventory levels among suppliers and end-users. These opposing trends meant that the price of potassium chloride continued to rise. However, demand was relatively weak in the second and third quarters, and while supply might be tight, it is still too early to draw definite conclusions. After all, the international market also relies on China’s supply, and the fact that China’s strategic reserves are about to be increased from two to three categories could have a somewhat negative impact on the supply-demand balance. Therefore, it is possible that prices will decline slightly during the off-season. In any case, whether things remain stable or experience a slight decline, life in the upstream sector will still be relatively easier. It’s useless to focus on being \"cute\"; it’s better to prepare for a long-term struggle in the downstream sector. ( Adu)