Xiangcai Securities: Potash prices are expected to rise when the two Russians cut production

The Zhitong Finance App learned that Xiangcai Securities released a research report stating that there is a mismatch between the world's main potash production sites and demand places, and trade adjustments are needed. Canada, Russia, and Belarus are major global potash producers and exporters. On the supply side, Belarus and Russia jointly cut production in 2025, and global potash production capacity is expected to be limited. Due to geopolitical events such as the Russian-Ukrainian conflict and the Red Sea crisis, the transportation costs of potash fertilizer increased, compounded the increase in potash mining costs, leading to an upward shift in the cost center of potash fertilizer suppliers. However, since the price of potash fertilizer fell back to a low level in 2023-2024, the profitability of potash fertilizer was under pressure, so the two Russians chose to cut production and raise prices. On the demand side, the demand for potash fertilizer may be expected to grow steadily as the area under cultivation of crops around the world increases. The supply and demand pattern of the potash industry is expected to improve.

The main views of Xiangcai Securities are as follows:

The mismatch between global potash production sites and demand requires trade adjustments

Potassium is one of the three essential nutrients for crop growth. Potash is widely applied to field crops and cash crops. Potash can increase crop yield and improve crop quality. Among potash fertilizer varieties, potassium chloride accounts for more than 90% of potash fertilizer products due to its rich resources, high nutrient concentration, and easy absorption.

The distribution of global potassium resources is extremely uneven. Canada, Russia, and Belarus are countries with high potassium reserves, and are also countries with high global potash production, accounting for 31.0%, 18.6%, and 14.5% of production, respectively.

Major global potash production sites and demand areas are mismatched, and trade adjustments are needed. On the demand side, China, Brazil, the United States, India, and Indonesia, as major agricultural countries, are major global consumers and importers of potash fertilizer. Canada, Russia, and Belarus are major global potash exporters, accounting for about 73% of total exports in 2021, and play an important role in the global potash trade. The global potash industry's supply and demand pattern is expected to improve.

On the supply side of potash fertilizer, Belarus and Russia will jointly cut production in 2025. On January 22, 2025, Belarusian potash giant Belaruskali plans to carry out large-scale equipment maintenance operations at its Soligorsk No. 4 mine, which will directly reduce the company's potash production by about 900,000 to 1 million tons. This round of maintenance lasts seven months and is expected to end in July of this year. On February 18, 2025, Russia's Uralkali (Uralkali) announced that its three mines (Berezniki-2, Berezniki-4, and Solikamsk-3) will be temporarily closed for maintenance in the second and third quarters of this year. This will reduce the company's production by at least 300,000 tons in the second quarter, and production in the third quarter will depend on maintenance conditions.

The reason why the two Russians cut production and raised prices was mainly due to rising potash costs and pressure on profitability

Geographical events such as the Russian-Ukrainian conflict and the Red Sea crisis have increased the transportation costs of potash fertilizer. Furthermore, the potash mines of international giants such as Russian Potassium and Belarusian Potassium have been mining for a long time, and mining costs have increased. As a result of these factors, the cost center of potash suppliers moved upward. However, since the price of potash fertilizer fell back to a low level in 2023-2024, the profitability of potash fertilizer was under pressure, so the two Russians chose to cut production and raise prices.

In terms of additional production capacity, global potash production expansion is expected to be limited in 2025. Mainly, Potash International's second and third potash fertilizer production capacity of 1 million tons/year may be expected to be launched. However, considering factors such as the uncertainty of when additional production capacity will be put into operation and the time for production capacity to climb, the actual increase in potash supply is expected to be limited in 2025.

On the demand side, demand for potash fertilizer is expected to grow steadily as the area under cultivation of crops around the world increases, especially the acceleration of modern agriculture in emerging markets. The International Fertilizer Association (IFA) predicts that global potash consumption (K2O discount) is expected to reach 41 million tons in 2025, an increase of 1 million tons compared to 2024. Based on the calculation of a single ton of potassium oxide minus 1.6 tons of potassium chloride, global potash consumption in 2025 (minus KCl) is expected to increase by 1.6 million tons compared to 2024.

The growth rate of supply in the potash industry in 2025 may be less than the growth rate of demand. Combined with the above analysis, the range of changes in global potash production in 2025 is expected to fall by 30 to 800,000 tons, but this value is lower than the estimated growth rate of 1.6 million tons of demand-side global potash fertilizer. The supply and demand pattern of the potash industry is expected to improve.

Recently, potash prices have shown an upward trend

Domestic potassium chloride has been dependent on imports in recent years, reaching about 67% in 2024. Domestic potash import dependency has caused domestic potash prices to follow global potash trends. Recently, the potash market price showed an upward trend against the backdrop of spring farming and the two Russian Federation announcing production cuts on the supply side. As of March 14, 2025, the prices of Qinghai Salt Lake Potassium Chloride (60% powder), Qinghai Salt Lake Potassium Chloride (57% powder), Qingdao Port Potassium Chloride (62% Russian and White), and Yantai Port Potassium Chloride (imported 60% red) were 2,800, 2650, 3250, and 3050 yuan/ton, respectively, up 9.8%, 10.4%, 27.5% and 27.1% compared with the beginning of the year. Furthermore, domestic potash port stocks have been low since 2024, which is expected to support potash prices.

Risk Alerts

There are risks such as production cuts falling short of expectations, new production capacity investment exceeding expectations, and demand falling short of expectations.