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Domestic Potash Fertilizer: Difficult to See in the Short Term
The domestic potash fertilizer market has remained relatively stable over the past week, though some regions saw a minor price drop of around 50 yuan per ton. Despite this, trading activity remains weak and lackluster.
According to Salt Lake's first-half financial report for 2013, the company generated revenue of 4.13 billion yuan, which fell short of expectations. During the same period, the company produced 1.3721 million tons of potassium chloride, representing a 13.28% increase compared to the previous year. Sales also rose by 18.84%, reaching 1.5594 million tons. However, despite higher production and sales volumes, profit declined due to falling prices. The average selling price of potassium chloride dropped by 17.3% year-over-year to 1,199.33 yuan per ton. As one of China’s leading potash fertilizer producers, Salt Lake’s performance reflects the broader challenges facing the domestic market this year.
As we move into the second half of the year, the potash market is struggling against a broader downturn in the fertilizer industry. Currently, it's the off-season for traditional potash sales, with summer fertilizers already distributed. Autumn preparations have not yet begun, and compound fertilizer plants are operating at low capacity. In the fall, demand is dominated by high-nitrogen and high-phosphorus fertilizers, further reducing the need for potash raw materials. At the same time, supply continues to rise: Qinghai has resumed normal operations and shipping, while new vessels are arriving at southern ports, increasing pressure on the port infrastructure.
Internationally, the potash market remains unstable following Uralkali’s exit from the BPC alliance. This development has led to significant volatility, with approximately 20–25% of stocks being sold off, wiping out nearly $20 billion in market value. Online discussions about potential regulatory changes and the end of the potash monopoly have become widespread. However, the market may not be as bleak as it seems. Before Uralkali acquired Silvinit, only two major Soviet potash suppliers existed—BPC and IPC. Now, the market is returning to a dual-supplier structure, which could bring more competition but does not necessarily mean a collapse in the pricing system. After all, maximizing profits remains the core goal of any capitalist enterprise.
The root cause of global instability lies in an oversupply situation. While potash prices in China saw slight monthly increases in the first quarter, the growth slowed in the second quarter but remained stable. By the second half of the year, U.S. and European markets began to see declines. Following Uralkali’s announcement, CIF prices in Southeast Asia and the Commonwealth of Independent States also started to fall last week. According to data from international industry organizations, the global potash market will continue to face excess supply for the next five years. Demand is projected to reach 29 million, 29.9 million, 31.2 million, 32.3 million, and 33.2 million tons respectively from 2013 to 2017, while supply is expected to rise to 49.7 million, 50.4 million, 54.5 million, 56.6 million, and 59.6 million tons.
Vladislav Baumgertner, CEO of Uralkali, recently stated that the company will operate at full capacity starting in August, aiming to boost sales rather than maintain price stability.
Overall, the domestic potash fertilizer market remains sluggish, with downstream customers showing little interest in purchasing. Market sentiment is growing increasingly negative. With increased border trade, port shipments, and continued production and distribution from domestic companies, the market is unlikely to hit a bottom in the short term.