The price of imported potash fertilizer has risen since the beginning of April, and so far, the increase has exceeded 300 yuan/ton. The market has been waiting for the news of the signing of the potash contract, hoping to point out the direction of the potash price through the signing of the big contract, but the big contract has not moved, what is the reason?
The timing and price of the large potash contract have become a secret for a few companies in China, and it is difficult for others to know why the large contract has not been signed so far. However, in the context of fertilizer supply, potash prices continue to rise, but potash contracts are delayed? This may be evident in India.
Like China, India is one of the few countries to sign potash contracts. In the mainland, enterprises bear the responsibility of ensuring the supply and price of fertilizers, supplemented by macroeconomic regulation and control, and more emphasis is placed on marketization; In India, the government is responsible for ensuring the supply and price of fertilizers, and while ensuring sufficient supply, it cannot increase prices. Although the mechanism is different and the pressure to ensure supply is different, China and India have chosen to postpone the signing of the potash contract, and there may be a common reason behind it:
1. Judge that the international supply of potash fertilizer exceeds demand
China and India jointly judged that the international potash fertilizer supply has exceeded demand, and the motivation to increase prices is insufficient, so both countries have postponed the signing of large contracts. In fact, due to the full release of production capacity in Russia and Belarus, and the significant increase in China's potash production capacity in Laos, there is no problem in judging that the international supply of potash fertilizer tends to exceed demand.
Second, postponing the signing of large contracts is conducive to price reduction
In the case of judging that the international supply of potash fertilizer has exceeded demand, the postponement of the signing of large contracts is conducive to driving down the contract price.
3. Not signing a large contract does not affect imports
It's not that you can't import without a big contract. Large contracts are only a long-term price lock-in, and can also be purchased from the spot market through short-term contracts (which is the main import method in other countries). This slows down the urgency of signing large contracts. China's potash imports are likely to reach 1 million tonnes in May, suggesting that the absence of large contracts does not affect imports. The same is true for India.
Fourth, the cost of shipping is the main reason for the delay in the signing of large contracts
Yemen's Houthi rebels continue to attack Red Sea shipping vessels, causing sea freight costs to soar. Potash is a dry bulk shipment, and it is more suitable to use the Baltic Dry Bulk Freight Index (BDI) to describe the change in freight rates: the BDI was around 1,000 points at its lowest last year; This year, it rose from more than 1,400 points at the beginning of the year to 1,997 points on June 21, an increase of 45%. This is closely linked to the situation in the Red Sea.
Now that the potash contract is signed, the seller must consider the reality of soaring shipping costs, and will not compromise on the cost of sea freight. For China and India, the situation in the Red Sea cannot last for a long time, and it is only a matter of time before the cost of shipping will fall, and the amount of large contracts signed is one year. If the situation in the Red Sea eases and freight rates fall, the losses suffered are a large number due to the large volume of contracts, so they are not willing to take the risk of a possible decline in freight rates. The instability of freight costs is the main reason why China and India have not signed a large contract for a long time.
In the author's judgment, until the situation in the Red Sea is stabilized, it is unlikely that China and India will sign a potash contract. Considering the overall interests of the country, the author is also not in favor of immediately signing a potash contract.
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Please indicate in the following format for reprinting: Source: Agricultural Resources Herald Author: Yu Lei Editor: Ma Xiaoru Review: Wang Meihong Producer: Jiang Shanjun