Consumption of Potassium Chloride Depends on Import  

By Wang Ling   


China's imported amount of potassium chloride accounts for around 70% of the total consumption.

  1   Rapid output growth

China has become a major potash fertilizer consumer and importer in the world. To reduce the dependence on the import of potash fertilizer, the Chinese Government has given full support to the development of potash fertilizer producers in recent years. After a period of rapid expansion from 2004 to 2005, the potassium chloride sector started a stage of stable development in 2006. The capacity to make potassium chloride in China reached 3.6 million t/a (physical goods) in 2006. Due to restrictions in resources, potassium chloride producers with considerable scale are mainly located in Charhan of Qinghai province. Qinghai Salt Lake Industry Group is the largest potassium chloride producer in China today. The production capacity in the company reached 1.8 million t/a in 2006.
   The output of potassium chloride in China has grown rapidly since 2003. The output was only 1.4 million tons in 2003, but rose to more than 3.0 million tons in 2006, an increase of more than 110% over that in 2003.
   The imported amount of potassium chloride in China was 7.053 million tons in 2006, a drop of 20.2% from 2005. The imported amount in the first half of 2006 was 2.837 million tons, a drop of 36.7% from the same period of 2005. The main reason for the remarkable reduction of the imported amount in the first half of 2006 was the failure to reach agreement in the negotiation with international potash fertilizer suppliers. International potash suppliers taking part in the negotiation suspended the export of potassium chloride to China during that period. The amount of goods delivered to Chinese ports reduced drastically. After the signing of contracts at the end of July 2006, the imported amount of potassium chloride rebounded rapidly. The delivery of potassium chloride at Chinese ports was mainly concentrated in the months from September to December and the imported amount reached 3.487 million tons, accounting for 49.5% of the total imported amount in the whole year.

  2   High price in 2006

The average retail sale price of potassium chloride in China was always maintained at a high level in 2006. The average retail sale price of imported potassium chloride was RMB2 100 per ton. Due to the low import amount in the first seven months of 2006, the demand for potassium chloride was brisk in the domestic market and the price increased. During the months from August to December the amount of imported potassium chloride delivered to ports increased and the price of domestic goods started to go down. The average retail sale price in the whole year, however, had no great fluctuations and was always maintained at around RMB1 900 per ton.
   The amount of imported potassium chloride in the second half of 2006 was much more than that in the first half. Many experts had forecasted that the price of potassium chloride in China would have considerable fluctuations. On the whole, however, the price of potassium chloride in China was relatively stable. The main reason for the price of potassium chloride to hover at a high level was the basic supply/demand balance of potassium chloride in the domestic market. In spite of the small imported amount in the first half of 2006, the inventory of potassium chloride was quite large and drastic market fluctuation did not appear. The greater delivery in the second half of 2006 was used to compensate for the supply shortage and inventory in the domestic market. The price of potassium chloride therefore had no great fluctuations in 2006.

  3   Sustained price rise in 2007

In the potash fertilizer contract signed with the international potash fertilizer supplier alliance in February 2007, the price was increased by US$5.0 per ton from that in 2006. As the contract was signed quite early, China started to make purchases at the beginning of 2007. The imported amount of potassium chloride in China already reached 4.866 million tons from January to June 2007 and the domestic demand was satisfied.
   When the imported amount of potassium chloride is relatively stable, the price of potassium chloride in the domestic market always has sustained rise. The main reason is that the delayed delivery of goods by international potash fertilizer suppliers causes temporary supply shortage in the domestic market. Besides, the increase of the ocean shipping freight also results in a higher CIF price of potassium chloride.
   Domestic potassium chloride producers can benefit from the sustained price rise of imported goods. Since January 2007 the price of potassium chloride in Qinghai Salt Lake Potash Co., Ltd. (SZ: 000792) has kept increasing. The ex-work price of potassium chloride in July 2007 was RMB200 per ton higher than the price at the beginning of the year. The price of shares issued by the company has also increased drastically.
   The international potassium chloride market has always been a sellers' market. Sellers hold the initiative in pricing. In the Asian market the price of potassium chloride imported by China is still relatively low and international potash fertilizer suppliers intend to further increase the price of potassium chloride exported to China. The price of potassium chloride in the domestic market will therefore still have a sustained rise in the second half of 2007.