By Zhou Yue, Sun Xiaohong, Wu Na, China Inorganic Salts Industry Association, Potash Branch

Performance of potash fertilizer industry in 2019

   1. Stable capacity and rising output

   China’s capacity to make resource-type potash fertilizers reached 7.16 million t/a (K2O) at the end of 2019. In detail, Qinghai Salt Lake Industry Co., Ltd. (Qinghai SL) represented 41.9% of the total, Golmud Zangge Potash Fertilizer Co., Ltd. (Golmud Zangge) 16.8%, SDIC Xinjiang Luobupo Potash Co., Ltd. (Xinjiang Luobupo) 11.2% and other firms 30.1%.

   In the first 11 months of 2019, domestic output of potash fertilizers was up 6.2% YoY to 6.88 million tons, 81% of which were from Qinghai (4.74 million tons, up 4.2% YoY) and Xinjiang (833 kt, down 0.2% YoY).

   Domestic output of resource-type potash fertilizers rose continually in 2019, with potassium chloride output seeing a big growth and accounting for nearly 80% of the total. Output of potassium sulfate that fell slightly took up around 20%, and that of potash magnesium sulphate fertilizers that has declined in recent years occupied just 0.5%. Weather effect greatly dragged down potassium chloride output of Golmud Zangge in 2019, while output of Qinghai SL soared and that of Xinjiang Luobupo remained stable. Table 1 shows domestic output of resource-type potash fertilizers in 2019.

   Table 1   China’s output of resource-type potash fertilizers in 2019E  (kt)

   2. Higher economic benefits

   In the first 11 months of 2019, main business income of the potash fertilizer industry was up 5.5% YoY to RMB27.94 billion, and total profits reached RMB5.22 billion, up 29.3% YoY. Profit margin of main business during the period was 18.7%, up 3.44 percentage points YoY (see Table 2 for details). According to data the National Bureau of Statistics collected from 66 potash fertilizer enterprises, 28 firms or 42.4% suffered total losses of RMB425 million (jumping 111.7% YoY).

   Table 2   Benefits of China’s potash fertilizer industry in Jan-Nov 2019 (Billion RMB)

   3. Soaring import and export volume

   Import volume of potash fertilizers was up 31.3% YoY to 8.56 million tons (quantity of goods produced) in the first 11 months of 2019. More specifically, volume of potassium chloride was 8.5 million tons, up 31.3% YoY, and that of potassium sulfate was up 2.1% YoY to 60 000 tons.

   Export volume of potash fertilizers surged in 2019 due to zero export tariffs. In the first 11 months of 2019, China exported 25.53 million tons of various fertilizers, up 12.2% YoY, and export value grew 4.5% YoY to US$6.85 billion. Export volume of potassium sulfate shot up 3 879.7% YoY to 307 500 tons, and that of potassium chloride amounted to 201 300 tons, up 18.4% YoY (see Table 3 for details).

   Table 3  Import and export of potash fertilizers during Jan-Nov 2019 (kt)

   4. Continuous price decline

   Domestic prices of potash fertilizers have started to decrease since the beginning of 2019. Take arrival prices of Qinghai SL’s 60% crystal potassium chloride as an example – the highest quotation was RMB2 420/t at the beginning of 2019 and the lowest quotation was RMB2 080/t at the end of 2019. Quotation of imported 62% white potassium chloride (through ports) fell from RMB2 575/t to RMB2 250/t. As for others, quotation of 62% white potassium chloride from Russia was down to RMB2 000/t in December from the highest of RMB2 290/t in January. The decreases were mainly attributed to contradictions between supply and demand.

   Potassium sulfate prices showed a similar trend. Quotation of Xinjiang Luobupo was stable in 2019, when arrival price of 51% granular potassium sulfate stayed at RMB3 250/t. Factory prices of process-type potassium sulfate (50% powder) declined from RMB2 925/t to RMB2 650/t.

   5. Historical high of inventories at ports

   Domestic potassium chloride inventories remained high in 2019 given a large quantity of imports delivered to ports and weak demand. Port inventories totaled 3.04 million tons at the end of 2019, up 1.29 million tons or 73.8% YoY. Four ports accounted for around half of the total – Lianyungang (557 kt), Yantai Port (450 kt), Yingkou Port (440 kt) and Tianjin Port (55 kt).

Forecast for 2020

   1. Supply and demand forecast

   Although domestic demand for potash fertilizers may grow, consumption tend to be stable and is forecast to be back to 2018’s level because of factors like “negative growth of fertilizer usage” plan. Hence, oversupply can hardly be solved.

   2. Price forecast

   Domestic prices of potassium chloride may remain stable before spring of 2020 as output and inventories are both decreasing. However, international potassium chloride prices are falling slowly and are impossible to rebound in a short term. Large contract prices for 2020 are forecast to decline US$30-50 from 2018’s level. Potassium chloride and potassium sulfate prices are forecast to show a downward trend in 2020.