By Zhou Yue, China Inorganic Salts Industry Association
Global supply gap of potash fertilizers expanded mainly due to regional conflicts, and China’s potash fertilizer production and transport were both challenged by the coronavirus, both in 2022. Hence sharp fluctuations in domestic potash fertilizer prices, which, however, remained lower than in other countries in 2022, benefiting from policies to require domestic producers to stabilize supply, government’s decision to utilize reserves of imported potash fertilizers, etc.
Low degree of self-sufficiency
Domestic production of resource-based potash fertilizers concentrates in Qinghai and Xinjiang. There are 23 resource-based potash fertilizer producers in China, boasting a combined capacity of 6.83 million t/a, 76.7% of which comes from Qinghai Salt Lake Industry Co., Ltd., Geermu Zangge Potash Fertilizer Co., Ltd. and SDIC Xinjiang Luobupo Potash Co., Ltd.
In the first 10 months of 2022, domestic output of resource-based potash fertilizers grew 9% YoY to 4.76 million tons, with output of potassium chloride rising 10% YoY and that of potassium sulfate rising 7.3% YoY. Seen from the whole year of 2022, operating rates of potash fertilizer producers were obviously higher than in 2021, especially in leading enterprises exceeding original production targets by 15%.
Long-term dependence on imported potash fertilizers
China has been a net importer of potash fertilizers in a long term, currently ranking third in the world by import volume – mainly, around 80%, from Russia, Canada and Republic of Belarus. In spite of output growth, domestic demand for potash fertilizers relies heavily relies on imports, amounting to around 5 million tons per year.
In the first 10 months of 2022, imported potash fertilizers totaled 4.02 million tons, increasing 1.08% YoY and valued at US$3.49 billion (soaring 110.2% YoY). In detail, import volume from Republic of Belarus was up 6% YoY to 1.63 million tons, while that from Russia was down 23.6% YoY to 1.59 million tons. Further, volume from Laos surged 26% YoY.
Domestic prices of potash fertilizers are mainly impacted by global markets due to low self-sufficiency rate. In 2022, big contract price of US$590/t increased costs of imported potash fertilizers to RMB4 200-4 600/t, which resulted in domestic higher spot prices of imported potash fertilizers. However, domestic potash fertilizer prices were still far below the world’s in 2022, compared with the highest of US$1 200/t in Brazil and the highest of US$1 100/t in Southeast Asia.
Dramatic decline in actual consumption
From January to October 2022, domestic apparent consumption of potash fertilizers reached around 8.73 million tons, growing 7.8% YoY, the first positive growth in recent three years. Annual apparent consumption also increased, mainly attributable to production expansion, import growth, decrease in export volume of potassium sulfate, etc.
As for actual demand for potash fertilizers in 2022, it was high in spring ploughing period and was satisfied with the help of national reserves of imported potash fertilizers. It started declining in summer, but in traditional autumn sowing period and in winter, a period when consumers generally reserve fertilizers, it failed to rebound. Operating rate of processing-type potassium sulfate plants fell 11 percentage points from 2021, and that of compound fertilizer plants was just around 32%, far lower than previous two years. Further, compound fertilizer producers decreased potassium proportion. Hence, actual consumption of potash fertilizers is forecast to decrease 10%-20% in 2022.
Output of potash fertilizers is forecast to be stable in 2023, and import volume will remain at 4.2-5.4 million tons. Prices of potash fertilizers will become more stabilized in spring ploughing period, when potash fertilizer supply is relatively sufficient.
