According to the Securities Times APP, Citic Securities released a research report stating that the global potash fertilizer price bottom range is relatively clear, and the industry's willingness to support prices continues to strengthen. On the demand side, driven by the high cost-effectiveness of potash fertilizers, downstream purchasing intentions are increasing; on the other hand, some grain crop inventories are sufficient to be cleared, prices are expected to rebound, which may further boost potash fertilizer demand. Citic Securities predicts a significant increase in global potash fertilizer demand in 2024-2025. On the supply side, it is expected that 2024-2025 will be a period of low production capacity output, and the industry has expressed intentions to reduce production. Citic Securities predicts that the global supply and demand for potash fertilizer will be tight in 2025, and the price of potash fertilizer is expected to rebound from the bottom.

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

Demand remains strong, with the possibility of production control on the supply side.

On the demand side: Nutrien and others expect global potash fertilizer demand to reach 70-72 million tons in 2024, and further rise to 71-74 million tons in 2025. We analyze that this expected growth is mainly driven by China, Latin America, and Southeast Asia. Palm oil prices in Southeast Asia have risen, leading to increased local purchases of potash fertilizers; strong soybean planting in Brazil with attractive soybean barter prices has led to a strong momentum in potassium fertilizer imports; the Chinese market is driven by planted areas and potassium replenishment demands for land, with import volumes continuously exceeding expectations. On the supply side: based on our statistics of expansion plans announced by various listed potash fertilizer companies, although overseas potash salt companies have planned an expansion of about 16.23 million tons, we expect that the actual implementation from 2024 to 2025 will be less than 2 million tons, with capacity concentration or deployment at the end of 2026 and 2027. Therefore, under the expectation of high demand, if top suppliers appropriately control production levels, we expect a tight supply situation for global potash fertilizer by 2025.

The industry price is basically at the bottom, and there is room for a rebound.

According to Bai Chuan News statistics, as of mid-November 2024, the potassium fertilizer prices in major global markets have fallen to the levels of the same period in 2019. In the long term, major grain crops such as wheat, corn, and rice have entered destocking stages, with potential price rebounds in the future. We analyze that potassium fertilizer prices are positively correlated with major grain crops, with the possibility of following the rebound. In the medium term, based on the financial reports disclosed by various listed companies, we estimate that the marginal production cost of the global potash fertilizer industry is currently close to $240 per ton. Under the assumption that the industry seeks reasonable profits, we expect the industry's bottom price to be in the range of $280-300 per ton. Currently, the prices of potassium fertilizers in Brazil and Southeast Asia have approached this price bottom line. Currently, the President of Belarus has proposed contacting Russian fertilizer producers to coordinate production cuts to boost potassium fertilizer prices, while negotiations on Indonesian potassium fertilizer tenders are difficult, with the latest supplier offer at $302 per ton, still higher than their counter-demand of $285 per ton. We believe that this indicates that major potassium fertilizer suppliers are more optimistic about future potassium fertilizer prices. Focusing on the Chinese market, the current major domestic stocks are concentrated in port trade merchants' hands, and we are bullish on their appropriate control of goods circulation. We expect that under the stimulation of winter storage and spring plowing fertilizer preparation, domestic potassium fertilizer prices are expected to rebound to 2600-2800 yuan per ton.

The supply market structure may be reshaped, tariffs and shipping costs affecting industry production costs.

From the analysis of the sources of potassium fertilizer imports in the Chinese market, we expect the Laos region to gradually become an important import base for potassium fertilizer domestically, while Canada will reduce its supply of potassium fertilizer to the Chinese market. The former Soviet Union region is expected to maintain its dependence on the Chinese potassium fertilizer market. Analyzing the cost structure of potassium fertilizer production from existing industry producers, tariffs and shipping costs have significantly impacted the trade of potassium fertilizer, especially with a 7% increase in export tariffs in the Laos region, which we estimate will add over 100 yuan/ton in tax costs. We expect this to pose a new challenge for potassium fertilizer production enterprises in that region in terms of cost reduction.

Investment strategy:

1) Demand falling short of expectations leads to further decline in potassium fertilizer prices; 2) Slow progress in potassium fertilizer capacity expansion below expectations continues; 3) Adjustment in tax policies leads to increased production costs of potassium fertilizer; 4) Prices of other fertilizers falling more than expected, dragging down the overall fertilizer market; 5) Extreme weather impacts causing unexpected changes in grain prices.

Investment strategy:

The global potassium fertilizer price bottom range is quite clear, with the industry's willingness to support prices continuing to strengthen. On the demand side, driven by the high cost-effectiveness of potassium fertilizers, downstream purchasing intentions are increasing; on the other hand, some grain crop inventories have been adequately depleted, prices are expected to rebound, potentially boosting potassium fertilizer demand further. We expect global potassium fertilizer demand to significantly increase in 2024-2025. On the supply side, we expect 2024-2025 to be a period of low capacity deployment, with the industry expressing intention to reduce production. We anticipate tight global potassium fertilizer supply in 2025, with potassium fertilizer prices likely to rebound from the bottom. We maintain a "outperform the market" rating for the potassium fertilizer industry and recommend two investment themes:

1) Due to short-term mismatch of supply, potassium fertilizer prices show a weak rebound, with performance improvement from economies of scale;

2) Capitalize on the window of opportunity for overseas new capacity in marine transportation, rapidly expand, and increase profits.