The Zhitong Finance App learned that CITIC Securities released a research report saying that the bottom range of global potash prices is quite clear, and the industry's willingness to raise prices continues to grow. On the demand side, on the one hand, it is driven by the high cost performance ratio of potash fertilizer, and downstream procurement intentions have increased; on the other hand, stocks of some grain crops have been fully removed, and prices are expected to rebound, which in turn may lead to a further increase in demand for potash fertilizer. CITIC Securities expects a significant increase in global demand for potash fertilizer from 2024-2025. On the supply side, 2024-2025 is expected to be in a low capacity investment phase, and the industry has announced a reduction in production. CITIC Securities expects global potash supply and demand to be tight in 2025, and potash prices are expected to rebound from the bottom up.

The main views of CITIC Securities are as follows:

Demand remains strong, and there is a possibility of production control on the supply side.

Demand side: Nutrien and others expect global potash demand to reach 70-72 million tons in 2024, and further rise to 71-74 million tons in 2025. According to our analysis, this expected growth is mainly driven by China, Latin America, and Southeast Asia. Among them, palm oil prices in Southeast Asia have risen, and local potash procurement has continued to increase; soybean cultivation is strong in Brazil, soybean barter prices are attractive, and potash imports are strong; the Chinese market is driven by planting area and demand for potash supplements, and imports continue to exceed expectations. Supply side: According to the production expansion plans announced by various listed potash companies according to our statistics, although overseas potash companies are planning to expand production by about 16.23 million tons, we expect less than 2 million tons to land in 2024-2025, and production capacity will be concentrated or invested in late 2026 and 2027. Therefore, under high demand expectations, if leading suppliers control production properly, we expect global potash supply in 2025.

Prices in the industry are basically at the bottom, and there is room for a rebound in the future.

According to Baichuan statistics, as of mid-November 2024, potash prices in major global potash markets have fallen back to the same period in 2019. Looking at the long-term cycle, the main food crops wheat, corn, and rice have entered the storage stage, and there is room for subsequent price rebounds. We analyzed that potash prices showed a positive correlation with major food crops, and there is a possibility that they will follow the rebound. In the medium term, according to financial reports from various listed companies, we estimate that the marginal production cost of the global potash industry is currently close to 240 US dollars/ton. Under the assumption that the industry is seeking reasonable profits, the bottom price of the industry is expected to be 280 to 300 US dollars/ton. Currently, potash prices in Brazil and Southeast Asia are close to this price bottom line. Currently, the President of Belarus is proposing contacts with Russian fertilizer producers to coordinate production cuts to boost potash prices. At the same time, Indonesia's potash tender negotiations are difficult. The supplier's latest price of 302 yuan/ton is still higher than its counterclaim of 285 US dollars/ton. We think these all indicate that major potash suppliers are more optimistic about future potash prices. Focusing on the Chinese market, the main domestic inventory is currently concentrated on port traders. We are optimistic about its proper control over the flow of goods. It is expected that under the stimulus of winter storage and spring cultivation and fertilizer preparation, domestic potash prices are expected to rebound back 2,600 to 2,800 yuan/ton.

The supply market pattern or reshaping, tariffs and freight costs affect the production costs of the industry.

According to the analysis of the source countries of potash imports from the Chinese market, we expect the Laos region to gradually become an important domestic potash import base, Canada will shrink potash supply to the Chinese market, and the former Soviet Union's dependence on the Chinese potash market is expected to be maintained. Based on the analysis of potash fertilizer production cost composition of existing industry producers, tariffs and shipping charges have had a significant impact on potash trade. In particular, the Laos region added 7% potash export tariffs, increasing tax costs by more than 100 yuan/ton according to our estimates. We expect this to present a new test of the cost reduction of potash producers in the region.

Risk Factors:

1) Demand fell short of expectations, and the price of potash fertilizer fell further; 2) progress in the expansion of potash fertilizer production continued to fall short of expectations; 3) tax policy adjustments increased potash production costs; 4) prices of other fertilizers fell more than expected, dragging down the overall fertilizer market; 5) changes in food prices exceeded expectations due to extreme weather.

Investment Strategy:

The bottom range of global potash prices is quite clear, and the industry's willingness to raise prices continues to increase. On the demand side, on the one hand, it is driven by the high cost performance ratio of potash fertilizer, and downstream procurement intentions have increased; on the other hand, stocks of some food crops have been fully removed, and prices are expected to rebound, which in turn may lead to a further increase in demand for potash fertilizer. We expect global demand for potash fertilizer to increase significantly in 2024-2025. On the supply side, we expect 2024-2025 to be in a low capacity investment phase, and the industry has announced a reduction in production. We expect global potash supply to be tight in 2025, and potash prices are expected to rebound from the bottom up. We maintain the potash industry's “better than the market” rating and recommend two main lines of investment:

1) The price of potash fertilizer was mismatched with the short-term mismatch of supply. Prices showed a weak rebound, and the advantage of scale led to an increase in performance;

2) Card slots build new overseas production capacity during the empty window period, rapidly expanding and increasing profits.