The concentration of global potassium resources is high, and China is short of soluble potassium resources. The world is rich in potassium salt resources. By 2020, the proven reserves of potassium resources in the world have been 3.7 billion tons (converted into K2O). However, the uneven distribution of potassium resources leads to the relative concentration of potassium salt production areas. According to USGS data, in 2020, the global potassium salt production Cr5 exceeded 85%, and Canada, Russia, Belarus, China and Germany were the top five potassium salt producing countries. China is rich in total potassium reserves, but there is a shortage of soluble potassium salts with economic value. At the same time, unlike other countries, which are dominated by solid soluble potassium salts, China’s soluble potassium resources are dominated by modern salt lake potassium mines.
Population demand, economic benefits and other dimensions have promoted the steady growth of potash fertilizer demand. The use of potassium fertilizer can promote plant metabolic process, promote protein synthesis, and effectively improve crop yield and quality. Compared with nitrogen fertilizer and phosphorus fertilizer, potassium fertilizer consumption is more flexible, and its dosage, price and inventory are highly related to Shenzhen Agricultural Products Group Co.Ltd(000061) price. As the per capita cultivated land area in the world continues to decrease, more food needs to be produced per unit area of cultivated land to meet the needs of a large population. More efficient fertilizer needs to be used in the planting process, and the demand for potassium fertilizer can be increased. In addition, for cash crops, the consumption of potassium fertilizer per mu is higher. Under the background of improving residents’ living standards and optimizing dietary structure, the continuous improvement of the planting area of cash crops such as vegetables and fruits will also promote the increase of potassium fertilizer demand. We believe that the above impact on potash demand is sustainable and is expected to promote the steady increase of global potash demand.
The supply of potash fertilizer is highly concentrated. Relying on overseas projects, the dependence of Chinese foreign enterprises on potash fertilizer is expected to be reduced. At present, the voice of global potash pricing is controlled by nutrien, Masson, Belarus potash, Ural potash, K + s and ICL. As the production capacity development cycle of the potash fertilizer green space project is as long as 7-10 years, and some global production capacity exits due to old facilities, high cost, water seepage and other problems, the growth rate of global potash fertilizer production capacity is relatively flat. The production capacity of potassium chloride and potassium sulfate in China has been relatively stable in recent years, with 8.1 million tons / year and 5.33 million tons / year respectively in 2021. However, as the largest country in global demand for potassium fertilizer, China’s dependence on potassium chloride import was as high as 57.5% in 2021. In the medium and long term, the capacity increment of Chinese potash enterprises mainly comes from overseas projects. The capacity planning of Lao potash fertilizer of Chinese enterprises has reached millions of tons. After the overseas capacity is completed and fully released, it can effectively alleviate the problem of insufficient self supply of China’s potash industry and effectively reduce the dependence on potash fertilizer of nutrien and other foreign enterprises.
Under the influence of emergencies such as covid-19 and the conflict between Russia and Ukraine, the supply of potassium fertilizer contracted and the price rose rapidly. Since the covid-19 epidemic, countries around the world have paid more and more attention to food security. Global food prices have risen rapidly, farmers’ willingness to plant has increased, and the demand and price of potash and other chemical fertilizers have increased significantly. In addition, the geopolitical conflict between Russia and Ukraine has continued to escalate recently. Russia and Ukraine are the major trading countries of wheat, corn and sunflower oil in the world. Russia is also an important producer and exporter of potash fertilizer in the world. The political conflict between Russia and Ukraine and the sanctions imposed by western countries on Russia and Belarus will lead to the contraction of global food and potash supply. Belarus and Russia account for nearly 40% of the world’s potash production. After being sanctioned, the two countries will further promote the increase of global food and potash prices.
Investment suggestion: in the medium and long term, the global demand for potash fertilizer is expected to increase steadily under the influence of factors such as population demand and economic benefits. In the short term, affected by covid-19 and the conflict between Russia and Ukraine, the price of potash fertilizer rose rapidly. Under the joint influence of short, medium and long-term factors, the potash fertilizer industry is expected to remain in a high boom state. We recommend Zangger mining and Qingdao East Steel Tower Stock Co.Ltd(002545) , and suggest paying attention to Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) .
Risk analysis: product price fluctuation, geopolitical risk, lower downstream demand than expected, capacity construction risk.
