By Zhang Jie

On February 10, China and BPC (Belarus Potash Company) signed an annual potash contract, at the price of US$247 CFR per ton of potassium chloride, up US$27/t YoY but remaining lower than prices BPC offered to most other countries. However, as most international suppliers do not accept this price, there will be no large quantity of supply to China in a short term. Hence lower domestic inventory and supply compared with previous years. The other nation that usually signs annual contract to buy potash fertilizers is India, and it inked a deal on January 29 with BPC, which agreed to supply 800 000 tons of potash fertilizers at the price of US$247/t CIF, up US$17/t from a year earlier.

Limited supply and low inventory

Potassium chloride prices remained low in 2020, when the world’s output and sales volume both increased. In the fourth quarter of 2020, international prices of potash fertilizers grew and market supply was comparatively tight. Since the same quarter, domestic port stock of imported potassium chloride has showed a decline trend, and reached around 2.9 million tons recently with marketable quantity of just 1.4 million tons.

Domestic potassium chloride market was slightly impacted by India’s contract with BPC, mainly in prices of imported potassium chloride from late January to the beginning of February. There were no obvious changes on prices of domestic potassium chloride as equipment overhaul of some plants dragged down operating rates to below 20%. Qinghai Salt Lake resumed production in mid-February, and other plants resumed mainly in March. Domestic prices of potassium chloride have increased since the end of February, because of low domestic inventory and foreign suppliers unlikely to supply products in large quantity.

International prices of potassium sulphate were basically stable in 2020, and exports of China’s potassium sulphate made Asian market prices slightly fluctuate. Most Mannheim potassium sulphate plants resumed production after the Spring Festival, with operating rates hovering at 76%. But their inventory greatly decreased compared with same period of last year. SDIC Xinjiang Luobupo Potash Co., Ltd. will conduct equipment overhaul in Q2 2021. This will cut supply and propel prices of its products.

Compound fertilizer plants are main downstream consumers of potash fertilizers. Their operating rates were low before the Spring Festival, but rebounded quickly to around 40% after the holiday.

Hardly changed supply monopoly in a short term

International potash fertilizer producers have no plans to cut output in 2021, when some new units are expected to be put into use. Rising international ocean freight makes speed of supply comparatively slow – more slowly for China and India owing to low purchase prices.

In China, supply of resource-type potash fertilizers is still tight as related resources are limited. Hence, domestic demand for potash fertilizers to a great extent relies on imports, which are restricted by international suppliers. It is hard to break supply monopoly in a short term.