By Wu Na, Sun Xiaohong, Zhou Yue, China Inorganic Salts Industry Association Potash and Potash Fertilizers Division

China potash fertilizer operation in 1H 2020

1. More MOP output, fewer SOP output
China produced 3 599 kt of potash fertilizers (converted to K2O, the same below) in January-June 2020, up by 1.9% year on year. The output of Qinghai stood at 2 461 kt over the period, up by 10.2% year on year and that of Xinjiang reached 447 kt, down by 18.6% year on year. Domestic resource-oriented potash fertilizers production totalled 2 610 kt in the first half of 2020, up by 4.9% year on year. The COVID-19 outbreak has had a limited impact on domestic potash fertilizers production. Qinghai Salt Lake Industry and Zangge Potash Fertilizers Company posted a higher MOP output in the first half of the year, while Xinjiang Lop Nor Potash Fertilizers Company curtailed SOP output as planned. Details are shown in Table 1.

2. Economic performance declines
China’s potash fertilizers imports decreased in the first half of 2020, easing the supply-demand contradictions and triggering a dramatic price fall. Overall industry economic performance declined. The domestic potash fertilizers industry’s main business income totalled RMB16.551 billion in January-June 2020, up by 1.7% year on year, profits at RMB2.727 billion, down by 9.4% year on year and main business margin stood at 16.47%, down by two percentage points year on year. Of the 64 potash fertilizers enterprises, 31 or 48.4% suffered losses, wider than 2019, according to the National Bureau of Statistics (NBS). They together posted a loss of RMB230 million, up by 67.5% year on year. Details are shown in Table 2.

3. Prices drop
Potash fertilizers prices inched upwards during spring ploughing in March and then fell consecutively until June, when prices began to stabilise. MOP prices declined by 14% on average and SOP prices retreated by 11%. By the end of June, ex-station prices for Salt Lake’s 60% MOP were at RMB1 780-1 820/t, down by RMB260-300/t or 14% from early-year level, while ex-works prices for 57% MOP powder from small-sized producers were at RMB1 300-1 350/t, down by RMB100-150/t or 10%. Offers for 62% Russian white MOP at ports ranged between RMB1 800-1 850/t, down by RMB370-380/t or 17% from the early-year level and those for border trade 62% Russian white MOP were at RMB1 600-1 650/t, down by RMB380-430/t or 21%. Figure 1 shows domestic MOP prices in 2019-1H 2020.

Figure 1 China MOP prices in 2019-1H 2020

SOP prices posted a smaller drop. By the end of June, as for resource-oriented SOP, ex-station prices for Xinjiang 52% SOP powder were at RMB2 450/t (agent price), down by 21% and those for Qinghai 50% SOP powder were at RMB2 250-2 300/t, down by RMB200-250/t or 10%. Ex-works prices for processing-grade 50% SOP powder stood at around RMB2 550/t, down by RMB100/t or 3.8%. 
4. Fewer imports, largely stable exports
China imported 3 814.4 kt of potash fertilizers (physical quantity) in January-June 2020, down by 30.17% year on year. Of these, MOP imports were 3 768 kt, down by 30.67% year on year and SOP imports were 458 kt, up by 52.7% year on year. Meanwhile, China exported 351.2 kt of potash fertilizers (physical quantity), down by 4.1% year on year. These included 186.8 kt of SOP, down by 8.3% year on year and 54.4 kt of nitrate of potash (NOP), up by 20.9% year on year. Details are shown in Table 3.

5. High port inventories
MOP inventories at domestic ports have been piling up since 2019 and peaked in February 2020 before moving down. By the end of June, MOP port stocks reached 2 910 kt, up by 18.4% year on year. Of these, Zhanjiang port held the largest number of inventories at 540 kt, followed by Lianyungang port at 500 kt, while Beihai port ranked the last, with 8 kt of MOP stocks.

Potash fertilizers market trend in 2H 2020

Domestic MOP prices are expected to hover at low levels in the near term, given weak demand-side support in response to falling operating rates at the downstream compound fertilizers industry and high port inventories. SOP producers plan to raise prices, on scheduled output cuts at Lop Nor and tight Mannheim process spot SOP supply in some regions. Large domestic potash fertilizers producers may post a higher production volume than the same period of last year. China has settled MOP import supply negotiations with Belarus and Jordon. There are ample inventories kept at domestic enterprises and ports. Hence, the potash fertilizers market may continue to see balanced supply-demand in the second half of 2020.