Operations in China’s Potash Fertilizer Industry in 2014 and Development Forecast

By Qi Zhaoying, the Potash Branch of China Inorganic Salt Industry Association, and An Chao, China National Chemical Economic and Technical Development Center

Operations in 2014

1. Resource based potash fertilizers

(1) Potassium chloride
In 2014, the number of potassium chloride producers in China was 32, a year-on-year decrease of four. The main reasons for this include the merger or acquisition of enterprises, a constant decrease of prices and further concentration of capacity. In 2014, China’s capacity to make potassium chloride reached 7.82 million t/a (physical goods), up 5% year-on-year, and the newly added capacity was mainly at Qinghai Salt Lake. The domestic output of potassium chloride reached 7.33 million tons (physical goods), up 14.4 year-on-year, hitting a new historical high. The price of potassium chloride (Qinghai 60%) fell from RMB2 950/t in 2013 to RMB2 050/t in 2014. In recent three years, the price of potassium chloride has gone way down. The price of potassium chloride was stable by the end of 2014.
(2) Potassium sulfate
In 2014, the number of potassium sulfate producers in China was 12, a year-on-year growth of 7. China’s capacity to make potassium sulfate reached 2.72 million t/a in 2014, up 9.7% year-on-year, mainly due to newly added capacity of Qinghai Lenghu Bindi Potash Fertilizer Co., Ltd and CITIC Guoan. Domestic output of potassium sulfate reached 2.01 million tons, up 26.4% year-on-year. Prices remained high, reaching RMB3 350/t, a year-on-year growth of 8.8%.
In that same year, China’s demand for potassium sulfate reached 4.2 million tons, up 52.7% year-on-year. There are four main reasons for this. First, at the current price level, the growers have a further understanding on the performance/price ratio of potassium sulfate. Second, with changes in planting structure, the consumption of sulfur based compound fertilizers for economic crops has increased. Third, the proportion of sulfur based compound fertilizers by major compound fertilizer producers rose significantly compared with that in 2013. Fourth, the market has been slack for six years, many processing-type potassium sulfate plants have been closed, and the supply and demand have changed.
(3) Potash magnesium sulfate fertilizer
In 2014, the number of potash magnesium sulfate fertilizer producers in China was 13, a year-on-year growth of 7. China’s capacity to make potash magnesium sulfate fertilizer reached 1.68 million t/a (physical goods) in 2014, up 95% year-on-year, mainly due to the startup of units of Qinghai Zhonghang Resources Co., Ltd and Qinghai Haixi Hefeng High-tech Potassium Industrial Co., Ltd. Due to the high price of potassium sulfate, the domestic output of potash magnesium sulfate fertilizer was 360 kt (physical goods) in 2014, down considerably from 2013. The price of potash magnesium sulfate fertilizer dropped from RMB2 000/t in early 2014 to RMB1 700/t in December 2014, and players have a better understanding of the performance/price ratio advantage of potash magnesium sulfate fertilizer.
The proportion of potassium, magnesium and sulfur in potash magnesium sulfate fertilizer is tailored to crops, and is more suitable for the current situation of domestic potash resources and soil demand.
(4) Potassium silicon-calcium fertilizer
In 2014, China had five potassium silicon-calcium fertilizer producers with a combined capacity of 470 kt/a (physical goods), up 42.4% year-on-year, and the output was 48 kt, basically the same as in 2013. The price of potassium silicon-calcium fertilizer remained stable. Potassium silicon-calcium fertilizer is rich in large and medium trace elements like potassium, silicon, calcium, magnesium and iron, and its PH value is 9.5-11.0. Its raw material is potassium feldspar, an abundant and widely distributed insoluble potash resource. This kind of fertilizer has six main advantages: low cost and abundance, along with its potential to increase output, improve quality, improve stress tolerance, ameliorate soil acidity and reduce the pollution of heavy metals. It is considered to be an important way to solve China’s soil acidification and to develop ecological agriculture.

2. Processing-type potash fertilizers

(1)Potassium nitrate
China had 46 potassium nitrate producers in 2014 with a combined capacity of 1.36 million t/a (physical goods), up 13.3% year-on-year, and the output was 760 kt (physical goods), a year-on-year growth of 45%. Domestic demand has increased considerably, with new demand arising mainly in the agricultural grade-water soluble material fertilizer sector.
(2) Potassium sulfate
In 2014, the number of potassium sulfate producers in China was 72, a year-on-year growth of 100%. China’s capacity to make potassium sulfate climbed to 3.32 million t/a (physical goods) in 2014, up 118.4% year-on-year, the output reached 1.98 million tons, up 90.4% year-on-year. The price of potassium sulfate was stable within a reasonable scope, rising slightly from around RMB3 200/t in early 2014 to around RMB3 300/t. China’s total consumption of potassium sulfate reached around 4.1 million tons in 2014, up 55% year-on-year, and the average annual operating rate was 66%, down considerably from 68.4% in 2013. The main reason for this is that after nearly seven years of sustained decline, many units have been idle too long, so the restoration of production also needs a process. In addition, the number of new units has increased.
(3) Potassium dihydrogen phosphate
Potassium dihydrogen phosphate is among the water-soluble fertilizers and foliar fertilizers. In 2014, the number of potassium dihydrogen phosphate producers in China was 40, a year-on-year decrease of 11. Due to excess capacity and fiercer competition, China’s capacity to make potassium dihydrogen phosphate is 590 kt/a (physical goods), down 5% year-on-year, while the output reached 321 kt, a year-on-year growth of 23%. China’s average capacity of potassium dihydrogen phosphate units has climbed from 12 kt/a to 15 kt/a.

3. Bulk potassium chemical products

(1) Potassium hydroxide
In the consumption mix of potassium hydroxide, there are 29 varieties, like potassium dihydrogen phosphate, dipotassium hydrogen phosphate and potassium pyrophosphate. The application of these products includes sectors like fertilizers, food additives and medicines. In recent years, with the expansion of market space in these sectors, potassium hydroxide has ushered in a better development opportunity. In 2014, China had 16 potassium hydroxide producers, and the industrial concentration degree improved considerably. At present, China’s capacity to make potassium hydroxide is 1.018 million t/a (physical goods), up 5% year-on-year, and the output is 697 kt (physical goods), a year-on-year growth of 18%.
(2) Potassium carbonate
In 2014, the number of potassium carbonate producers in China was eight, a year-on-year decrease of 1. After technical transformations, the capacity of many units rose considerably. China’s capacity to produce potassium carbonate reached 315 kt/a (physical goods) in 2014, up 16% year-on-year; however, output decreased 16% year-on-year. The price of potassium carbonate also decreased considerably from RMB7 400/t in early 2014 to RMB5 600/t by the end of 2014. A new change in 2014 is that with the price reduction of potassium carbonate, players in the fertilizer industry began to try to use potassium carbonate.
(3) Food and pharmaceutical grade potassium chloride
At present, the number of food and pharmaceutical grade potassium chloride producers in China is 26, a year-on-year growth of 4. China’s capacity to make food and pharmaceutical grade potassium chloride reached 300 kt/a (physical goods), up 88% year-on-year, and the output is 145 kt, a year-on-year growth of 70%. In 2014, the overall operating rate was 48%, down 4.2% year-on-year. This shows that the competitiveness of the food and pharmaceutical grade potassium chloride sector is being enhanced, and the industrial concentration is increasing.
(4) Others
Hubei Xingfa Chemicals Group Co., Ltd is the largest producer of potassium pyrophosphate in China. In recent years, potassium pyrophosphate has been used extensively in the food sector. Producers of potassium chlorate and potassium perchlorate have been very few in the northern regions and has mainly shifted to the regions with hydropower like Hunan province, Sichuan province and Fujian province. The output of potassium chlorate is still very small – it is mainly used to produce matches. The production of fireworks has shifted to use potassium perchlorate as raw material, so the output of potassium perchlorate has climbed rapidly in recent years. China’s other potassium salts in 2014 are listed in table 1.

General development situation

1. Resource situation

China’s potash resources include soluble potash, insoluble potash and overseas potash resources. China’s potassium salt is a new generation potassium salt, the abundance of soluble potash mine resources is smaller than that of insoluble potash, the mining conditions are poor, the resources are low grade (the content of brine potassium oxide is 0.9%-1.92%), and the production cost of potash fertilizer in China is about double that of countries like Canada. At present, China’s proven reserves of potassium salts are mainly distributed in modern salt lakes. The identified resources of soluble potash were 1.005 billion tons in 2013 (there are 42 identified potassium salt production regions in seven provinces), down 10 million tons year-on-year. The Qaidam Basin of Qinghai province is the major distributed region, the Lop Nur north depression of Xinjiang comes next, and other resource regions include Yunnan province, Shandong province, Sichuan province and Gansu province. The preliminarily identified resources of insoluble potash amount to 300 billion tons, and according to incomplete statistics, the reserves of overseas sylvite and carnallite were around 17.6 billion tons of KCl (potassium chloride).
At present, China’s area of cultivated land is 8% of the world total, the domestic potassium salt resources are only 0.1% of the global total, while China’s population is 20% of the world total, so the resources do not match the demand in China.


Table 1   China’s other potassium salts in 2014

Item    Potassium pyrophosphate    Potassium chlorate    Potassium perchlorate    Potassium cyanide
The number of enterprises    5    40    40    1
Capacity (kt/a)    20    150    350    2
Output (kt)    10    100    200    2

Table 2    China’s production of the potash fertilizer industry, 2014      (kt/a, kt)

Resource-based     Product    Potassium chloride    Resource-based potassium sulfate    Potash magnesium sulfate    Potassium silicon-calcium    Potassium nitrate
    Number of producers    32     12     13     5     1
    Capacity    7 820    2 720    1 680     470     10
    Output    7 330    2 010    360     48     7
Processing-type     Product    Potassium nitrate    Processing-type potassium sulfate    Potassium dihydrogen phosphate        
    Number of producers    46     72     40         
    Capacity    1 360    3 320    590        
    Output    760    1 980    320        
Potassium chemical products    Product    Potassium carbonate    Potassium hydroxide    Potassium pyrophosphate    Food grade potassium chloride    Potassium chlorate
    Number of producers    8     16     5    26     40
    Capacity    315    1 020    20    300    150
    Output    130    700    10    145    100


2. Capacity and output

In 2014, China’s capacity to make resource-based potash fertilizers reached 6.77 million t/a (100% K2O), equivalent to 10.75 million t/a (100% KCl), up 8% from 9.95 million t/a (100% KCl) in 2013. China produced 5.52 million tons of K2O, equivalent to 8.77 million tons of KCl (deducting the repeated amount), up 10.7% from 7.92 million tons of KCl in 2013. China’s production of products related to the potash fertilizer industry in 2014 is shown in table 2.

3. Import and export

Due to China’s lack of potash resources, the supply deficiency of potash fertilizer is great, and the domestic supply has depended on import for a long time. In 2014, China’s total import volume of potash fertilizers reached 8.142 million tons of KCl, up 27.8% from 6.368 million tons in 2013. The main reason for this was that the prices of imported potash fertilizers declined considerably, resulting in the growth of import volume. China exported 604 kt of KCl, up 49.1% from 405 kt in 2013. The main reasons for this were that China’s output of potash fertilizers rose constantly and the tariff was reduced.

4. Supply and consumption

In 2014, China’s total supply of potash fertilizers reached 20.27 million tons of KCl, up 19.2% from 17.98 million tons of KCl in 2013, and apparent consumption was 17.42 million tons of KCl, up 19.1% from 14.62 million tons of KCl in 2013. At present, China’s self-sufficiency for potash fertilizers is 50.3%. China’s supply and demand of potash fertilizers in recent years are listed in table 3.

Development Forecast

In general, China’s capacity and output of potash fertilizers will still grow in 2015.
It is expected that by the end of 2015, China’s capacity to make potash fertilizers will increase to around 12.2 million t/a (100% KCl), the output will stay around 9.5 million tons (100% KCl), and the import volume will remain at 6.0 million-7.0 million tons. With the growth of domestic potash fertilizer output, China’s export volume will grow further, and apparent consumption is expected to grow 10%. As for prices, based on the current arrival price of RMB2 100/t (60% KCl), the price of potassium chloride will increase around 10% in the first half of 2015 and will neither grow excessively nor drop too much. According to the costs of the main foreign producers and their requirements for bottom line profits, the CIF price of US$300-350/t is likely to be the “new normality” of the import prices of potassium chloride in the next few years. In 2015, China’s newly added capacity of resource-based and processing-type potassium sulfate will be around 3.1 million t/a, and considering the capacity of 6.04 million t/a in the existing units in 2014, it is expected that by 2015, China’s capacity to make potassium sulfate will reach 9.14 million t/a. In 2015, the oversupply of potassium sulfate sector is already inevitable, and the price of potassium sulfate is likely to decrease to RMB3 000-3 100/t. As for policy, faced with the excessive capacity expansion of potassium sulfate, players will strive to further reduce the export tariffs of processing-type potassium sulfate in 2015, but on the other hand, resumption of the collection of value-added tax on potash fertilizers has been the general trend. In addition, it is worth mentioning that the development growth of the agricultural business is getting faster and faster. Due to the growth of China’s planting scale and market integration, the survival of pure potash fertilizer traders will be increasingly difficult, and the close combination of producers, large traders and large-scale planting bases will be accelerated.

Table 3   China’s supply and demand for potash fertilizers  kt (100% KCl)
Year    2007    2008    2009    2010    2011    2012    2013    2014
Output    4 215    4 189    5 091    5 303    6 037    5 984    7 920    8 770
Import volume①     9 479    4 870    2 198    5 100    6 130    6 343    6 368    8 140
Total supply②    13 814    9 373    7 283    10 446    14 378    16 276    17 984    20 270
Total consumption    13 195    9 337    9 591    11 240    10 397    12 521    14 619    17 420
Self-sufficiency (%)    31.3    44.9    53.1    47.2    58.1    47.8    54.2    50.3
Note: ①The import volume is the total imports of potassium chloride, potassium sulfate, potassium nitrate, binary and ternary potassium-bearing compound fertilizer and potassium hydroxide after being converted to KCl. ②The total supply includes inventory.



Suggestions

Faced with the present status of China’s great attention to the security of the food supply, the shortage of water and acidification of the soil, players put forward the following requirements on the potash fertilizer industry: First, the industry should guarantee to support a sustainable supply of potash fertilizers and maintain a more lasting self-sufficiency rate of 50%. Second, players should develop the water soluble potash fertilizers such as potassium chloride, potassium nitrate (KNO3) and potassium dihydrogen phosphate (KH2PO4), etc. Third, players should develop potassium silicon-calcium fertilizers – developing potassium feldspar potash resources where they are abundant. Therefore, experts have put forward the following suggestions:
(1) Players should quicken their steps of “going out”
To expand the foundation reserves of domestic potassium salts, China should establish overseas potash fertilizer bases, and make long-term sustainable development plans for the next 10 years, 20 years, even 100 years. The qualified large enterprises should take positive action and link up the existing overseas potash fertilizer base projects.
(2) Strengthen utilization of insoluble potassium resources
China should work out feasible policies to support large-scale industrial dissemination and application of insoluble potassium resource based fertilizers
(3) Appropriate imports and increasing exports
On one hand, according to the market needs, China should properly import potash fertilizer, and implement a strategic plan for state reserves for potash fertilizer, especially when the international prices of potassium salts are low. On the other hand, China should set a new export tariff policy to strengthen the export of fine products with high added value like food grade potassium chloride, potassium dihydrogen phosphate and potassium nitrate.
(4) Standardization of product quality
China’s potash fertilizer industry has reached a considerable scale, and the standardization in fields like potash resource mining methods, processing methods and the quality specification of products should be expedited. The standards for products such as potassium chloride, potassium dihydrogen phosphate and food grade potassium chloride require serious revision, and the mining methods for potassium silicon-calcium fertilizer (conditioner) and potash need to be proposed as a national standard.
In addition, China’s potash fertilizer industry needs to increase its concentration and raise its automation level.