According to the report released by Citic Securities, the bottom range of global potash prices is expected to be more clear in 2024. On the demand side, grain prices are low, and there is further room for upward growth in the future; on the supply side, it is expected to be a stage of low capacity deployment from 2024 to 2026. Two investment directions are recommended: 1) short-term mismatch of potash prices with supply presents weak rebound, and scale advantage will bring performance improvement; 2) seize the opportunity of the overseas new capacity blank period to expand rapidly and increase profits.

The main points of the Citic Securities research report are as follows:

On the demand side, it is expected that the demand for potash fertilizer will be basically stable in the future under low grain prices. Global demand for potash fertilizer is expected to return to the level of 2020 in 2024, waiting for the next round of grain cycle.

According to Nutrien, a leading company in the potash industry, global demand for potash fertilizer is gradually recovering from the low impact of the Russia-Ukraine conflict in 2022. It is expected that under the premise of stable global supply of potash fertilizer, it will be difficult for the situation of massive hoarding similar to 2022 to reappear, but under low prices, the proportion of fertilizer cost in agriculture will continue to decline, and the affordability of fertilizer for farmers will increase. Global demand for potash fertilizer is expected to return to the same period in 2020. From the perspective of terminal demand products, according to data from the US Department of Agriculture, global soybeans have accumulated inventory, while corn, wheat, rice, and palm oil have reduced inventory. Currently, the prices of major grain crops are still low, and there is room for further upward movement in the future with the recovery of the global economy, which is expected to drive further growth in demand for potash fertilizer.

On the supply side, global potash fertilizer production expansion is steadily progressing, and domestic enterprises will seize the important expansion period from 2024 to 2026.

According to the announcements of various companies, major global players in potash fertilizer are steadily advancing their expansion plans, among which the expansion of BHP's Jansen mine will significantly affect the supply pattern of potash fertilizer worldwide. Domestic enterprises mainly expand production in Laos. From the perspective of potash salt demand, based on a global potash fertilizer demand of 70 million tons (pure KCl), the annual capacity investment of 1 million tons by enterprises led by Asia Potash International Investment will have an impact of about 1.4% on the industry, and the industry supply is still controllable. Before BHP's 4.35 million tons of capacity is put into the market at one time, under the strategy of "price priority", the supply shock of the potash fertilizer industry can still be eased by tightening the supply of head enterprises. Therefore, 2024-2026 is expected to be an important card period for domestic enterprises to expand production.

The bottom for global potash fertilizer prices is basically clear.

Since 2022, most potash fertilizer production enterprises have been interfered by factors such as energy, transportation, and trade barriers, and costs have increased to varying degrees, among which the former Soviet Union region has seen the most significant increase, providing stronger cost support for potash fertilizer prices. Assuming reasonable profits, it is expected that the bottom price of potash fertilizer in Brazil will be between 302-320 US dollars/ton (CFR). In comparison, the expected import contract price of China is between 280-300 US dollars/ton, and the global potash fertilizer price is currently basically in the bottom range.

Investment strategy:

If demand is lower than expected, potash fertilizer prices will further decline; the progress of potash fertilizer expansion is still lower than expected; tax policy adjustments increase production costs of potash fertilizer; the price of large contracts is lower than expected; extreme weather affects and grain prices change more than expected; global trade instability increases; domestic potash fertilizer imports are blocked.