Price Trend of Potash Fertilizers Flattens      

By Qi Zhaoying, China Inorganic Salt Industry Association  

With impacts from international economic conditions, the demand for potash salts and potash fertilizers in China is flat and even somewhat slack this year. The mainstream price of potash delivered to users has stayed around RMB2 500 per ton.
   In 2009, the soft market for compound fertilizers and the low operating rate of compound fertilizer producers in China directly caused the slack demand for potash fertilizers. In 2009 the highest price for potassium chloride appeared in March. Take Russian red potassium chloride for instance. The port price was RMB4 000-4 100 per ton in March. The price of Russian red potassium chloride at eastern China ports dropped to below RMB2 300 per ton in October and November. The price of potash in China increased slightly at the beginning of December 2009 and the highest price of Russian red potassium chloride at eastern China ports grew to around RMB2 900 per ton.
   With the completion of negotiations on bulk potash fertilizer contracts between China and Russia's Belorussian Potash Company (BPC) in November 2009, however, potash prices in China started to go down. The price of Russian red potash at eastern China ports was mostly around RMB2 700 per ton and the price of 62% Russian white potassium chloride was RMB2 750-2 800 per ton at the end of December. There were few transactions. The prelude for the slack potassium chloride market of 2010 was therefore started.
   In late February 2010 after the Chinese New Year, the potassium chloride market in China started a slight recovery. The price of imported Russian red potassium chloride in Shandong province was RMB2 600-2 650 per ton and the price of 62% imported Russian white potassium chloride was around RMB2 750 per ton. Due to the sustained low operating rate in compound fertilizer producers and the weak intension in making purchases, however, the selling pressure was increased. The price of potassium chloride in China once again started to go down after mid-March.
   The mentality of potassium chloride distributors in China had a temporary turn for the better at the beginning of March. Many players thought that the price had already reached the bottom and compound fertilizer producers would likely have intentions to make big purchases in April. There were therefore more inquiries in the market. Moreover, April was also the fertilizer application season for rice in southern China and transactions were okay. The price of border-trade Russian red potassium delivered to Shandong province was RMB2 500-2 520 per ton. The port price of Russian red potassium chloride was around RMB2 600 per ton and the port price of 62% Russian white potassium chloride was RMB2 650-2 700 per ton. The market, however, failed to go in the direction traders expected. Due to the sustained slack demand among end users, the operating rates of compound fertilizer producers even showed signs of falling further. The market price of potash fertilizers was seemed stable but in reality it was dropping. The price of Russian red potassium chloride in eastern China was still in the range of RMB2 350-2 380 per ton at the end of June.
   The price of potassium chloride in the international market generally dropped in a step-by-step fashion from 2009. Each price drop was basically the result of huge impacts produced by the signing of new import contracts by Brazil, India and China on the international potassium chloride market.
   After violent ups and downs of the potash market from 2007 to 2009, both the international and domestic potash fertilizer markets started to return to a rational status. If uncertain factors are discounted, it is expected that the market price of potassium chloride will stabilize around RMB 2500 per ton, changing between down 10% and up 10% in 2010. The price of potassium sulfate will be maintained at RMB2 800-3 100 per ton and the price of potassium magnesium sulfate will be around RMB1 900-2 000 per ton.
   The price of imported Russian red potassium chloride at eastern China ports was mostly RMB2 350-2 380 per ton in July. After a slight price rise made by border-trade suppliers, some traders in China have also tried to increase their offering prices. The market response is however flat. As the demand is still soft and the operating rate in compound fertilizer producers shows no sign of improvement. It is expected that the potassium chloride market in China will remain generally dull and slack.
   The market price of potash fertilizers in the international market is firm and various suppliers are trying their best to increase their prices. The border-trade import in China has always been in a state of semi-stagnation in the past few months. The inventories of small and medium traders are on the low side and the price has already been maintained at a low level for some time. In addition, an exceptional storm in Germu of Qinghai province has led to a considerable reduction of domestic potassium chloride output in 2010. The serious spring drought in the southwestern region and the recent widespread storm in the southern region have increased the demand for potash fertilizers due to the need for replanting in autumn. The market price of potash fertilizers will possibly have an increase. From this aspect, there is therefore no big space for a price drop of potash in China.
   The annual supply of potash fertilizers in China has fallen rapidly after it peaked in 2007. This has resulted mainly from a drastic reduction of import activity, which in turn has been caused by the slack market demand and the unexpected high market prices.
   Due to the prominence of seasonal demand in the market for agricultural production-means products, a slack season reserve system for the nitrogenous fertilizer sector has already been established by the government. Specific reserve capital is put aside to increase the reserves of chemical fertilizers in the slack season so as to stabilize the prices of agricultural means.
   Sinochem reportedly intends to acquire PotashCorp of Canada. This move will likely have extreme impacts on the international potash fertilizer market. If Sinochem get it, Chinese purchasers would acquire favorable position in importing potassium chloride. The heavy shortage for potash resources will be eased for China.

Supply of Potash Fertilizers in China from 2004 to 2010 (thousand tons K2O)
Year    2004    2005    2006    2007    2008    2009    1H 2010
Output    1 516    1 623    2 334    2 599    2 639    3 207    1 430
Import    5 144    6 152    4 909    6 301    3 515    1 260    1 292
Export    119     112     266     197     249     5    18.9
Total supply    6 541    7 663    6 977    8 703    5 905    4 462    2 722
Source: CNCIC