By cutting costs and increasing efficiency while improving both internal and external aspects, China’s potash fertilizer industry reaches a new level

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Global monopoly persists In 2012, the pattern of global monopoly over potash fertilizer continued. The world’s reserves are concentrated in a limited number of **regions, with over 80% of the world’s potassium fertilizer reserves and production capacity located in countries such as Canada, Russia, and Belarus. Statistical data show that out of the 17 potassium salt production projects worldwide, 11 are located in Canada. In addition, the top three companies, Saka, Meisheng, and Jiayang, account for approximately 96% to 97% of the world’s total reserves, with their main mining areas located in Canada. Another major factor contributing to the establishment of a monopoly is the constant activities carried out by another major potash fertilizer monopoly, BPC, in establishing new potash projects around the world as well as through mergers, acquisitions, and reorganizations; as a result, the degree of monopoly over potash resources is increasing. Looking at the global sales landscape for potash, Canpotex, formed by Salar de Uyuni, Mosaic, and Agrium to circumvent the WTO’s quota trade restrictions, handles all overseas sales outside of North America. All potash fertilizer companies in Canada, for markets outside North America, must have their sales handled by Canpotex. And all companies that develop potash mines in Canada face great difficulties in selling their products overseas, even if they obtain mining rights; any potash fertilizer mined in Canada that is to be sold abroad must go through Canpotex. At the same time, groups such as BPC are increasingly adopting measures to limit production and set prices, and a situation in which potassium fertilizer exports are priced on a case-by-case basis is becoming the norm for sales. 　　However, Wang Xiaofeng, deputy director of the Industry Development Department of the China Petroleum and Chemical Federation, also pointed out that although the world has large reserves of potash resources, there is an issue of overcapacity and low utilization rates. According to data analysis, the global production of potash fertilizers increased from 42.7 million tons of K2O in 2010 to 44.6 million tons of K2O in 2011; it is expected to rise further to 46.8 million tons in 2012. The supply and demand balance of potash salts indicates a potential surplus of around 6 to 6.5 million tons of K2O in 2011 and 2012. Looking at 2010, the operating rate of the potash industry reached 74% of its nominal capacity, compared to only 48% in 2009. The operating rate of potassium fertilizer plants is also declining continuously. 　　Domestic supply and demand balance In 2011, China’s self-sufficiency rate for potash fertilizers also exceeded 50% for the first time. Compared with the same period last year, China’s potassium fertilizer production capacity for resource-based potassium fertilizers increased by 12.5% in 2012. This production capacity mainly comes from Qinghai Salt Lake Group, Zangge Potash Fertilizer, Lenghu Bindi Potash Fertilizer, and Zhongnong Xingyuan Potash Fertilizer. It is worth noting, however, that China’s total potash fertilizer production declined by 0.8% on a year-on-year basis. This indicates that while production capacity has increased this year, the total output of potash fertilizers remains roughly the same as last year. In terms of the import and export of potash fertilizers, China’s total potash fertilizer imports this year are expected to reach 4.08 million tons of K2O (equivalent to 6.476 million tons of KCl in terms of physical quantity). In 2012, the total export volume of potassium salts was 252,000 tons of K2O, which is equivalent to 400,000 tons of KCl in terms of physical quantity. In terms of inventory, domestic port inventories are expected to amount to 1.4 million tons of KCL in physical form by the end of 2012. In 2012, corporate inventory is expected to be 2.3 million tons of KCL in physical form, while pipeline inventory is estimated to be around 2.5 million tons of KCL in physical form. The total inventory is approximately 4.79 million tons of K2O, of which 4.15 million tons of KCl in physical form were carried over from the end of 2011. Based on the above data, the total potassium salt supply in 2012 was approximately 16.62 million tons of KCL in physical form. 　　Looking at the apparent demand for potash fertilizers in 2012, according to the China Potash (Fertilizer) Industry Association, the actual domestic demand for potash fertilizers this year is approximately 10.12 million tons of KCL in terms of physical quantity. This year, the self-sufficiency rate for potash fertilizer is 47.8%. According to available data, the domestic projects under construction (or in the planning stage) include the second phase of the project carried out by SDIC Xinjiang Lop Nur Potash Co., Ltd., which aims to produce 1.7 million tons per year of potash fertilizer; the plan by the Salt Lake Group to develop a solid-liquid conversion process for the production of 1 million tons per year of potassium chloride; and projects related to the utilization of liquid minerals from the Dalangtan Salt Lake in Qinghai. With the continuous expansion of production capacity in the future, along with the current production capacity of over 20 manufacturing enterprises amounting to nearly 4 million tons of potash salts, China’s potash salt production capacity could reach over 5 million tons of KCl per year in the future. 　　The trend of seeking cost savings and optimizing resources has gained momentum. Faced with industry monopolies worldwide and shortages of domestic resources, the concept of sustainable development has been repeatedly emphasized by the China Potash (Fertilizer) Industry Association this year. The branch stated that in 2012, efforts to increase revenue and reduce expenses in the potassium fertilizer industry came from various sources, with the development of insoluble potassium resources, the promotion of a circular economy, and improving the overall efficiency of resource utilization being the key aspects in this regard. Since the founding of the People’s Republic of China, great emphasis has been placed on the exploration for potash salts, and significant human and material resources have been invested in this effort. After years of effort, the proven potassium salt reserves in China are currently mainly found in modern salt lakes. However, since China lacks soluble potassium resources, a more rational planning of domestic potash fertilizer resources is necessary. The rapid progress in technological breakthroughs and industrialization of insoluble potassium resources in China in recent years has brought new prospects to the country’s future potash fertilizer industry. According to incomplete statistics, China’s total reserves of potash feldspar amount to as much as 10 billion tons. How to convert potassium in poorly soluble potash feldspar resources into fertilizer to be utilized in agricultural production has always been a focus of attention within the industry. After more than 40 years of effort, particularly through research and development in the past 10 years, breakthrough progress has been made in the project to convert insoluble potassium resources into fertilizers. In China, several techniques have been developed, represented by methods such as hydrothermal treatment and calcination. At the \"Seminar on Fertilizer Production Technologies and Industry Development Using Insoluble Potassium Resources in China\" held in March this year, experts and scholars from various ministries, commissions, and research institutions gave high praise to the use of insoluble potassium resources for fertilizer production. As industrialization approaches, the products of companies such as Shanxi Ziguang, Anhui Huayue, Shanxi Fubang, and Henan Zhongke Mingxing are also increasingly entering the market to be tested under market conditions. 　　Focusing on the comprehensive utilization of resources to cut costs in the potassium fertilizer industry, as well as developing a circular economy and improving the overall resource utilization rate, are other aspects related to cost reduction in this industry. Ma Haizhou, director of the Qinghai Salt Lake Research Institute of the Chinese Academy of Sciences, believes that China’s potassium salt production technology is roughly on par with that of developed countries, but there is a significant gap in the comprehensive utilization of resources. In natural potassium resources, in addition to potassium, there are also large amounts of elements such as magnesium, lithium, and boron. These valuable resources have not been utilized effectively in China, which represents a great waste; it also weakens the competitiveness of enterprises. Dai Gang, deputy general manager of SDIC Xinjiang Lop Nur Potash Co., Ltd., said that it is essential for potash production enterprises to make comprehensive use of resources in order to ensure sustainable development. After the plant capable of producing 1.28 million tons of potassium sulfate per year came online in the first half of this year, figuring out how to make good use of the by-product sodium chloride became a practical challenge for them. 　　Call for simultaneous focus on domestic and international efforts: Domestic companies are seeing a growing number of potash fertilizer projects under construction (or in planning) overseas. Chinese companies have ambitious plans for potassium fertilizer production overseas; by the end of 2011, China owned mining areas of over 700 km2 in Laos. And certain potassium resource reserves already exist in the Republic of the Congo and Saskatchewan, Canada. According to the person in charge of overseas potash fertilizer projects, at present, the area of mining sites for which China’s 4 operating companies in Laos hold extraction rights amounts to over 700 km2. Of this area, 324.8 km2 is designated for exploration purposes. The total proven reserves of potassium resources amount to around 500 million tons, while the controllable reserves are about 1 billion tons; the prospective reserves of potassium resources exceed 10 billion tons. China has already obtained exploration licenses for potassium mines covering over 10,000 km2 in Canada, with proven potassium resources amounting to around 1 billion tons. Several other companies are in talks regarding potassium ore exploration permits, with companies such as Zhongchuan International working on a construction plan for a production capacity of 3 million tons per year of potassium chloride. Additionally, certain amounts of potassium resources and potassium fertilizer supplies are also likely to be available in countries and regions such as Uzbekistan, Ethiopia, Russia, and Belarus. 　　Regarding the use of potassium fertilizers in China, Zhang Weifeng, a doctor at the Center for Resources, Environment and Food Security at China Agricultural University, said that there have been significant changes in China’s land use patterns, with the amount of chemical fertilizers applied continuing to increase. Thanks to years of potassium fertilizer application, a balance has now been achieved between the amount of potassium lost from Chinese soils and the amount applied; therefore, the overall demand for potassium fertilizers in Chinese agriculture will remain stable in the coming period. The focus of potassium fertilizer application is no longer on significantly increasing the amount used, but rather on adjusting the proportion of potassium fertilizer accordingly based on the needs of different regions and crop varieties. At the same time, the increased requirement for potassium fertilizer solubility in integrated water and fertilizer management has promoted the direct application of potassium fertilizer. In the future, as efforts to promote straw return to the fields and projects aimed at increasing organic matter levels continue, the efficiency of potassium fertilizer use in China will be further improved. 　　Stability will be the priority next year. According to the forecasts of the Potassium Salts (Fertilizers) Branch of the China Inorganic Salt Industry Association, the domestic production of potash fertilizers in 2013 is expected to be around 4 million tons of K2O, representing a slight increase compared to 2012’s level of 3.77 million tons of K2O. Next year, the total supply of potash fertilizer will be around 10 million tons of K2O. Supply is expected to be ample in 2013, with the self-sufficiency rate remaining around 50%. The apparent demand for potash fertilizer throughout next year will be around 7.5 million tons of K2O. Excluding uncertain factors, the ex-factory price of potassium chloride (60%) in 2013 is expected to remain at around 2,600–2,800 yuan per ton. Products such as potassium sulfate, potassium nitrate, potassium carbonate, and potassium hydroxide will have a reasonable profit margin based on their costs, and the market will operate in a rational and stable manner. 　　Most executives from potassium salt companies say that the potassium fertilizer market has essentially reached its bottom, and as demand for fertilizers increases this winter and next spring, potassium fertilizer prices are expected to rise steadily. Industry representatives generally believe that stable market prices are a win-win outcome for both potassium fertilizer producers and consumers. Promoting the healthy development of the industry and increasing agricultural production in China is the ultimate goal of those working in the potassium fertilizer sector. However, company representatives also reminded distributors that the potassium fertilizer industry has become more rational over the years, and severe price fluctuations are unlikely to occur again. Next year, the price of potassium fertilizers will be more in line with market conditions; it is not advisable to engage in irrational buying and selling based on price fluctuations. (Wang Yang)