Potash fertilizer industry review report: the potash fertilizer contract is implemented, and the industry boom is expected to be maintained

Event: according to Zhuo Chuang information, on February 15, Canadian potash fertilizer company signed a 2022 potash fertilizer supply contract with India, with a CIF price of US $590 / ton, and the supply time is up to December 31. In the afternoon of that day, China's joint negotiation group on imported potash fertilizer signed a contract with the international potash fertilizer supplier potash Corporation of Canada, which determined that the import price of standard potassium chloride in 2022 was cfr590 US dollars / ton, an increase of 343 US dollars / ton compared with the contract price of 247 US dollars / ton in 2021.

Since 2021, the supply and demand pattern of potash fertilizer has improved, and the price and industry boom have increased significantly, driving the rise of large contract prices in 2022.

The contract price of potassium fertilizer increased significantly compared with that in 2021, mainly driven by the sharp rise in the price of potassium fertilizer since 2021. It is estimated that the current price of potassium chloride is about $4300-4200 per ton CIF in Russia, which is basically the same as the current price of potassium chloride at the port of China, equivalent to about $4300-4200 per ton CIF in China. Since the beginning of 2021, with the combination of global monetary easing and economic recovery, the international Shenzhen Agricultural Products Group Co.Ltd(000061) price has continued to rise. In addition, the supply side has been tightened due to the shutdown of some overseas production units, which has promoted the continuous rise of potassium fertilizer price. As for China, as of February 15, 2022, the average market price of potassium chloride in China was 4342 yuan / ton, up 104.33% from the beginning of 2021. Internationally, as of February 15, 2022, the FOB prices of potassium chloride in Russia, Vancouver and northwest Europe were reported at US $625.5/ton, US $610.0/ton and US $631.5/ton respectively, up 217.5%, 197.6% and 221.37% respectively compared with the beginning of 2021. The rise in global potash prices is the main driving force behind the sharp increase in the price of this large contract.

Global potash resources are unevenly distributed, and China is highly dependent on potash import.

The global potash reserves are concentrated in Canada, Russia, Belarus and other countries, and the total reserves of the three countries account for 60% of the world. Due to the concentration of resources, the global potash supply also presents a highly centralized pattern. Seven potash giants such as nutrien, Meisheng, Ukrainian potassium and white potassium account for 74% of the global potash production capacity. China's potash production ranks fourth in the world, but only accounts for 5% of global reserves. At present, the mining capacity can only be exploited for 20-30 years. Due to the limited potash resources, China's potash output has been controlled at a reasonable level for many years, and the dependence on potash import has remained above 50%. In the future, the increment of potash fertilizer supply in China will be limited, and it is expected to remain dependent on imports for a long time in the future. As the supply of potassium fertilizer is highly dependent on foreign supply, the price of potassium chloride in China is greatly affected by the international market. After the signing of the large contract price, it is expected to become an important reference for the pricing of potash fertilizer in China and support the price of potash fertilizer in China.

International grain prices are running at a high level, which supports the price of potash fertilizer.

Potash fertilizer has a strong resource attribute. Due to its scarcity of resources, the demand has a great positive correlation with the price and profitability of crops. When the price of crops is high and the profitability is good, the use proportion of potassium fertilizer will increase, resulting in the growth of demand. From the perspective of potash fertilizer price and international grain price, the rise of grain price is conducive to the growth of pesticide sales. Since the second half of 2020, with the combination of global monetary easing and economic recovery, the international Shenzhen Agricultural Products Group Co.Ltd(000061) price has continued to rise, driving the price of potash fertilizer and other chemical fertilizers to rise. At present, the global food price index is close to the historical high in 2011, which supports the prices of potash fertilizer and other chemical fertilizers.

The price of potash fertilizer is expected to remain high in 2022, and the industry boom is expected to maintain.

From the perspective of industry supply, Belarus, as the world's major producer of potash fertilizer, accounts for 20% of the global market and is also China's major supplier of potash fertilizer. Recently, Belarus encountered further sanctions on the export of potash fertilizer. The export channel through Lithuania by railway was closed by Lithuania. At present, no suitable export route has been found, which has a great impact on the global supply of potash fertilizer. In the future, the global potash fertilizer production capacity supply will continue to tighten, while the global economic recovery and the rise of food prices are expected to drive the demand for potash fertilizer in the agricultural field, promote the potash fertilizer price to remain at a high position, and the prosperity of the potash fertilizer industry is expected to be maintained.

Investment suggestion: the prosperity of potash fertilizer industry is expected to maintain a cyclical upward trend in the future, and relevant potash fertilizer enterprises are expected to benefit. It is suggested to pay attention to Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qingdao East Steel Tower Stock Co.Ltd(002545) .

Risk tip: the demand of the industry is declining, and the supply of potash fertilizer in Belarus is higher than expected

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