Potash prices may rise again this year

The important booster for fertilizer imports in the first 11 months of 2010 was the soaring import of potash fertilizer. Behind the soaring imports of potash fertilizer is the success of the potash negotiations in early 2010, which led to a drop in the import price of potash under general trade and an increase in the total import volume, which, to a certain extent, stimulated an increase in the import volume of potash fertilizer border trade. In the current situation that domestic potash fertilizer imports are leaping forward, the potassium resources in the upstream have become more concentrated.

At present, the domestic import of fertilizers "accidentally" appeared "abnormal increase in the total price, but the unit price fell". According to statistics, in the first 11 months of 2010, the country imported 6.49 million tons of fertilizer, amounting to US$2.34 billion, an increase of 71.4% and 24%, respectively; the average unit price was down by 27.6% to US$361.3/ton. The above situation is very different from the same period in 2009. Analysts pointed out that an important booster for fertilizer imports in the first 11 months of 2010 was the soaring import of potash fertilizer. Behind the soaring import of potash fertilizer is the fact that the success of the potash negotiations in early 2010 led to a drop in the import price of potash under general trade and an increase in the total import volume, which stimulated the fact that the import volume of potash fertilizer border trade increased to a certain extent. “The success of the potash negotiations in early 2010 was the key,” said the person in charge of the China Minmetals Chemicals Import & Export Chamber of Commerce. However, behind the gratifying data is the fact that it is hard to ignore.

In December 2010, OAOUralkali and OSO Silvinit, two major potash companies in Russia, merged. Earlier, PotashOne also signed an acquisition agreement with PotashOne, Canada's first potash company. In the current situation that domestic potash fertilizer imports are leaping forward, the potassium resources in the upstream have become more concentrated. Negotiations won the boost to import volume "Analysis of the data is not difficult to find, too low base in the same period in 2009 is the main reason for soaring fertilizer imports." Li Linna, analyst at the China Business Center for Productivity Promotion. In November 2008, the country imported 640,000 tons of fertilizers. Due to the impact of the international financial crisis, the domestic demand for chemical fertilizers was sluggish. In 2009, the import volume suddenly dropped sharply. In November of that year, the country imported only 220,000 tons of fertilizer, a drop of 66% year-on-year. In November 2010, the national import fertilizer increased to 550,000 tons. Therefore, "Compared with the data of the period of import warming, the import volume of potash fertilizer that was in an abnormal state was 144.9% higher than the same period of last year," said the relevant person in charge of the Minmetals Chamber of Commerce. "The low baseline over the same period is only one of the reasons. The sharp increase in imports of potash fertilizer, which dominates fertilizer imports, is an important booster for fertilizer imports in the first 11 months of 2010." The source said.

The potash fertilizer negotiations in 2008 were unsatisfactory. The FOC price of potassium chloride (contract price), which dominated imported fertilizer, was as high as 565 US dollars per ton, which was an increase of 240% (approximate) compared to 2007. The high price of imported potash fertilizers coupled with the impact of the financial crisis has enabled domestic potash fertilizer imports in 2009 to only “touch the heels of the import volume in the previous year” at 2 million tons. In 2010, China obtained a potash import contract price of US$350/t. “The drop in imported potash prices directly led to an increase in the import of potash under general trade.” The relevant person in charge of the Minmetals Chamber of Commerce said, “On another level, As a result of the drop in the import price of potash under general trade, it has indirectly led to the lowering of the import price of potash for border trade, which has boosted the increase in import volume of potash fertilizer.

In November 2010, the country imported 430,600 tons of potash fertilizer, an increase of 566.23% over the same period of last year. From January to November 2010, the country imported 4.665 million tons of potash fertilizer. This has already surpassed the forecast of an analyst in early 2010 that "China's 2010 annual import volume is expected to reach 4 million tons." “China's potash fertilizer production companies have limited supply of domestic potash fertilizer due to climatic factors and restrictions on transport conditions, and the potash fertilizer has a low social inventory,” said Chang Yongzhi, a researcher in the chemical industry of China Investment Consulting Group. The import of potash which dominates the current imports of fertilizers has pushed up domestic fertilizer imports."

The depressed potassium fertilizer industry has finally ushered in the dawn of hope. The fact that the tide of mergers and acquisitions is gloomy but behind it is the dark tide of mergers and acquisitions. In December 2010, Russia's two major potash companies, OAOUralkali and OSO Silvinit, merged; Potash Corporation of Germany and Canada's No. 1 potash company signed an acquisition agreement. Earlier this year, BHP Billiton was more interested in Saskatchewan. Potash, in an attempt to take hostile offers for $38.6 billion. According to public information, Uralkali is Russia’s largest and the third largest potash fertilizer producer in the world. 90% of its products are exported to foreign countries, mainly to Brazil, India, and China. Once the two companies have successfully merged, they will create the second largest potash producer in the world, second only to Potash Corp.

Monopoly often leads to excess profits, which is fully confirmed in the iron ore market. In the global situation of severely asymmetric supply and demand of potash fertilizer, how will the upstream potassium resources become more concentrated and what will happen to the downstream market? In this regard, analysts pointed out that there is no need to worry about the monopoly of potassium fertilizer. At present, it is only the over-hype caused by capital-for-profit behavior, and there are some stakeholders who are behind the over-hype. At present, China's potash fertilizer industry has formed a potash fertilizer production base based on salt lakes in Qinghai Province and Lop Nur Salt Lake in Xinjiang Province. In 2009, the three major mineral potassium fertilizers such as potassium chloride, **potassium, and **potassium/magnesium fertilizer were produced in the two major industrial bases. The conversion of potassium chloride into physical substances amounted to 5.5 million tons. In 2009, the consumption amounted to 6.7 million tons, and the self-sufficiency rate of consumption reached 82%.

At the same time, with the reduction of arable land in China, and the state’s encouragement of returning straw and organic fertilizer, it will supplement the soil with some potassium, thereby reducing the use of potash fertilizer. Therefore, in the future, China's dependence on potash fertilizer imports will not be too high, and there is no need to worry too much about the monopoly of the international potash fertilizer market in the future. However, in the view of Chang Yingzhi, a researcher in the chemical industry of China Investment Advisors, “at present, the self-supply rate of potash fertilizer in China is low, and overseas potassium resources have not played a role in the domestic potash fertilizer market. After the merger of the two fertilizer companies in Russia, the pricing power of BPC will be It will increase, and our country’s bargaining power in the import price of potash will be correspondingly weakened. This is very detrimental to China’s 2011 potash fertilizer import negotiations, and the potash price is likely to rise in 2011.”