Potash: Facing Challenge with A Moderate but Stable Growth
Year:2018 ISSUE:23
COLUMN:INORGANICS
Click:256    DateTime:Dec.07,2018


By Zhou Yue, Potash Branch of China Inorganic Salts Industry Association


Potash market operation in 1H 2018

   1. Domestic potash production increased slightly year-on-year

   According to the National Bureau of Statistics, China’s potash output from January to July this year was 3.328 million tons (K2O), an increase of 2.5% YoY. Qinghai ranked first in the output, with the figure at 2.296 million tons, down 0.8% year-on-year, and Xinjiang ranked second, 587 kt in the first half of the year, up 1.5% year-on-year. The output of potash produced directly from potassium declined in the first half of the year, mainly due to the large impact of temperature and the shortness of mineral resources in the first quarter. As for potassium sulphate, the production of SDIC was stable, and the output was basically the same as last year, but this year's shutdown and maintenance period was extended compared with last year. Other manufacturers in Qinghai generally started production late, the overall output of potassium chloride decreased significantly compared with last year, and the production of potassium sulfate was basically the same as last year (see Table 1 for details).

   Table 1  China’s potash capacity in 2017 and production from January to July 2018 (K2O)

ProductCapacity in   2017 (potassium-based) (kt/a)Production from   Jan to Jul 2018 (kt)YoY (%)
Total7 1793 3282.5
Qinghai6 2762 296-0.8
Xinjiang9035871.5

   2. Market prices continued to rise

   Since the fourth quarter of 2017, domestic potassium chloride prices have risen largely due to the rising international potash prices. At the beginning of 2018, the price of 60% potassium chloride in Qinghai Salt Lake was RMB2 150 / t, and by the end of August, the prices rose to RMB2 350 / t. The wholesale price index of potassium chloride market was RMB2 000 / t at early 2018, and then increased to RMB2 077/t in early June, up 25.7% from the same period last year. The price increase of imported potassium chloride was also obvious. At the end of August, the price of 62% white potassium reached RMB2 350-2 400 /t, up 23.3% year-on-year. The average price of potassium chloride was RMB2 164 / t in the first quarter, RMB2 227 / t in the second quarter, and RMB2 308 / t in July and August. The month-on-month growth was RMB63 / t and RMB81 / t respectively.
   The market prices of potassium sulphate have been fluctuating at a high level in the first half of the year. Due to weak demand, sales have fallen compared to last year. The price of SDIC has been kept at a high level: its 51% granule product quoted at RMB3 100 /t at the beginning of the year, and then went up to RMB3 150 /t in August, an increase of 1.6%, up 16.7% year-on-year. The processed potassium sulfate was affected by various factors like raw materials, demand and environmental protection policies and thus presented a V-shaped trend: the 50% powder was quoted at RMB2 900 / t at the beginning of the year and then went down to RMB2 780 / t at the end of May and is lingering at RMB2 900 / t now. It is expected that the price of potassium sulphate will remain stable in the short term.

   3. Imports in the first half of 2018

   In the first half of 2018, potash imports continued to increase. From January to July 2018, China imported 4.475 million tons of potassium chloride, an increase of 9.4% year-on-year; the import volume in July was 299 kt, a significant decrease from the same period last year. Imports will decrease in the second half of the year, and the whole year’s import volume is expected to be slightly higher over 2017.

   Table 2   The monthly imports of potassium chloride from 2014 to 2018 (kt)

Imports201420115201620172018
January477.5721.8972.3965.8945.6
February532.6623451.81 053.1972
March621.4636.7512.7848.7824
April747.7822.6710.8691.7810
May928.6557.2371.1253.8550
June558.9437.4352.1100350
July681.3885.5246.4423299
Total4 5484 684.23 617.24 336.14 745
YoY (%)13.192.99-22.7819.889.4

   4. Inventory increased compared to last year

   At the beginning of 2018, the port inventory was 2.1 million tons. At the end of August, the inventory volume fell to 1.65 million tons. Due to the late start of spring ploughing and the lack of demand, the port inventory of potassium chloride in the first half of the year has also increased, at above 2 million tons. However, as the 2018 contract for potash has not been concluded by the end of August, the port inventory has fallen to the level before the contracts being signed last year.

   5. Industry profits picked up obviously

   Driven by the international potash market, China's potash fertilizer prices increased significantly in the first half of this year, and the industry profits increased significantly. From January to July, the main business income of the industry reached RMB17.52 billion, a year-on-year increase of 4.6%; the industry profit reached RMB390 million. Among the 63 potash enterprises, 22 companies suffered losses, a decrease of 5 compared with the same period last year.


Potash supply-demand situation and analysis for the second half of 2018

   1. Supply of raw materials

   The prices of raw materials such as coal, electricity and natural gas are rising continuously, having a greater impact on potash. Coal prices rose sharply after 2016, from RMB200/t to RMB400/t, and the cost increased significantly. The cost of natural gas is also rising as the actual supply price rose toRMB1.30/Nm3. Meanwhile the shortage of natural gas supply in winter also affects the potash production directly. The potassium sulphate production enterprises have been requested to change the route from coal to gas, and thus most enterprises have to stop production due to insufficient natural gas supply in winter, resulting in an overall decline in processing potassium sulphate production.

   2. Potash market demand

   In the past two years, due to the agricultural fertilizer reduction and arrangement of field fallow rotation, the actual application rate of potassium fertilizer has decreased, and the current annual demand is about 15 million tons. Although the domestic economic crop planting area has increased in the past two years, prices have been sluggish in recent years, and potassium applied to field crops has continued to decline. Even if the demand for potash fertilizer increases, the growth is small. Since the application of potash fertilizer is largely dependent on the use of compound fertilizer, and the apparent consumption of nitrogen fertilizer and phosphate fertilizer is declining, potash fertilizer is hence difficult to revive. At present, the demand in autumn can be satisfied with the potassium enterprises’ inventory, compound fertilizer plants’ inventory and traders’ inventory. After the start of the winter market, if the potash production curtailed due to problems of mine resources and natural gas supply, the potash supply will be tight.

   3. Potash market trend in the second half of 2018

   In the second half of the year, the domestic potash market prices will have a moderate but steady upward trend. There will still be a slight increase, and the market will still face enormous challenges. In October, the compound fertilizer will enter the preparation season, and the consumption amount of potassium fertilizer in the downstream will gradually increase. Secondly, the fertilizer season for tobacco, fruits and vegetables will come. The price of the potassium sulfate market has risen to RMB3 150/t now, supporting the market favorably. In addition, as the international potash prices are still rising, the domestic potash price will remain stable with a small increase room. In the fourth quarter, supported by factors like rail transportation, rising raw material costs and operating rates, the potash prices may rise again. The potassium chloride prices will remain in the band of RMB2 300 – 2 400/t, and the fluctuation will not be too large.