China's Potash Production Capacity Will Be Raised in the Next Five Years   

By Qi Zhaoying, Potash Branch, China Inorganic Salt Industry Association

Hou Hubin, Qinghai Salt Lake Industry Group Co Ltd

1.  China's potash output rises steadily

China's potash demand is currently met by domestic production and imports. In 2010, the self-sufficiency rate stood at about 50%. China aims to increase this rate to 80% by the end of 2015.
   China's potash supply totaled 8.53 million tons (potassium oxide. The hereafter the same) in 2010, while its apparent consumption reached 7.08 million tons of potassium oxide, up 17% year on year. The growth of the consumption was mainly caused by more affordable potassium chloride prices in 2010, which led to the quick recovery of potash demand. At present, the domestic potash production can not meet the actual demand, so China has to rely on imports to meet the domestic demand. Potassium chloride imports totaled 5.24 million tons in 2010 (physical amount), equivalent to 3.30 million t of potassium oxide. Exports of potash, including potassium chloride, potassium sulfate and potassium nitrate, totaled about 60 000 tons, and carry-over inventory was about 1.32 million tons. China's potash supply in recent years is shown in Figure 1.
   According to Figure 1, China's potash supply began to fall significantly after peaking in 2007 because of a sharp decline in imports. The falling imports were mainly caused by the rising market demand and soaring prices. The potash supply totaled 6.54 million tons in 2006 and 8.7 million tons in 2007. The supply began to fall in the second half in 2008 and bottomed in 2009 at 4.46 million tons. In 2010, the potash supply started to bounce back significantly. Figure 1 also shows that the two lines converged before 2009 but started to diverge from each other in 2010. This means that the domestic production is taking an increasing part of the total supply as China reduces reliance on imports.

(1) Potassium mineral-based potash
At present, potassium mineral-based potash products in China mainly include potassium chloride, potassium sulfate and potassium magnesium. The main feedstock is the bittern in salt lakes located in Qinghai province and Xinjiang region, the solid potash in Yunnan province as well as the seawater bittern in Shandong province, Tianjin and Jiangsu province. In 2010, both the total capacity and output of potassium mineral-based potassium chloride, potassium sulfate and potassium magnesium reached record high levels at 4.49 million t/a and 3.34 million tons, up 15.21% and 4.19% year on year, respectively.
   There were about 40 major potassium mineral-based potash producers in China in 2010, mostly in Qinghai province. Qinghai Salt Lake Industry Group Co Ltd is the largest potash maker in China, accounting for 21.28% of the nation's total capacity, followed by SDIC Xinjiang Lop Nor Potash Co Ltd, which accounts for 6.49% of the total. Golmud Zangge Potash Co Ltd is the third largest, taking up 4.90%. The combined market share held by the top ten potash producers totals 38.41%, and the rest 67.33% is occupied by other producers and imports.

(2) Synthesized potash

a. Mannheim potassium sulfate
The production capacity of Mannheim potassium sulfate in China stood at 1.76 million t/a (physical amount) in 2010, down 24% year on year. Output soared by 123.57% year-on-year to 939 000 tons. There are about 60 major producers in China, including China Qingshang Chemicals (Group) Co Ltd, Migao Group, Shandong Sanfang Chemical Industry Co Ltd, Shijiazhuang Hehe Chemical Co Ltd, and Heilongjiang Qihua Chemical Co Ltd-s chlor-alkali plant.

b. Agricultural potassium nitrate
The production capacity for agricultural potassium nitrate is expected to rise significantly over the next two to three years. Qinghai Yuantong's 200 000 t/a production line will come into operation in 2011, while Wentong Group will relocate its Shanxi province-based potassium nitrate facility to Golmud, Qinghai province by building a new 200 000 t/a potassium nitrate plant. This will greatly lower production costs and increase the market share of agricultural potassium nitrate. Annual output may further rise to 200 000 tons from the existing 120 000 tons. That indicates China's potassium nitrate output can reach 500 000 - 600 000 t/a over the future three years.

c. Potassium dihydrogen phosphate
At present, there are around 20 potassium dihydrogen phosphate producers in China, with a combined production capacity of 200 000-300 000 t/a. The actual capacity and output of potassium dihydrogen phosphate are not easy to calculate, because such producers are usually small and scattered and they can produce either potassium dihydrogen phosphate or ammonium phosphate. Domestically, the capacity of such facility typically would be bigger than 20 000 t/a. China rolled out a specially supporting policy in 2010 by providing free potassium dihydrogen phosphate to farmers in the drought-stricken south and southwest regions.
   Thanks to the supporting policy, China's potassium dihydrogen phosphate output reached 100 000 tons in 2010. In addition, a Chongqing-based company has developed a new process to use wet-process phosphoric acid to directly make potassium dihydrogen phosphate. This process will greatly lift the production of agricultural-grade potassium dihydrogen phosphate in the short term.

(3) Microporous potassium-silicon-calcium mineral fertilizer
Microporous potassium-silicon-calcium mineral fertilizer is made from insoluble potassium resources, such as potash feldspar, in the semi-wet state using the static hydrothermal process, which is able to transform all the secondary- and trace-elements in potassium-bearing rocks as a whole into an effective form of nutrition absorbable by plants. This technology was industrialized in 2010. Two plants built in Nanyang, Henan province and Huairou, Beijing are expected to come into operation in 2011.

2. Prices remained low in 2010

In the first half of 2010, the vast majority of the potash market in China was sluggish with a slight downturn in prices. The price of domestically made potassium chloride (60% content) was quoted as low as RMB2 350/t at the end of June 2010. However, the potash market both at home and abroad started to recover in July with prices keeping rising till the end of November, when the Chinese government announced measures to stabilize commodity prices. Potash prices started to stabilize at high levels in December (potassium chloride around RMB2 850 /t).
   The prices of resource-based potassium sulfate had remained at RMB3 000-3100/t since October 2009. The market has rebounded since July 2010. Prices once reached as high as RMB3 300 /t and are now around RMB2 850 /t.
   The prices of synthesized potassium sulfate were quoted around RMB3 050 /t throughout the first half of 2010. Prices rose in the second half to RMB3600-3700 /t.
   The prices of potassium magnesium fertilizer remained low at RMB1 900-2 000 /t in 2010.
   The prices of agricultural-grade potassium nitrate remained weak in the first half of 2010 at RMB4 500-4 800 /t, and reached RMB5 500-5 700 /t in the second half 2010.
   The market of potassium dihydrogen phosphate is a bit disordered. The prices of agricultural-grade products made by regular plants fell to around RMB7 000 /t in June 2010 from RMB12 000 /t in the beginning of 2009. Prices bounced back to around RMB9 000 /t at the end of 2010.

3. 2011 market forecast
Resource-based potash output is expected to reach a record high of 3.5 million - 3.6 million tons in 2011, up 3% - 4% year on year. The growth will mainly come from rising production from SDIC