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The industry has been calling for China to be more fully prepared to face the world's monopoly of resource oligopoly.
International Potash Giants Jointly Raise Price “The autumn grain situation this year is not optimistic.†Dr. Shen Bing of the National Agrochemical Service Center of the Sacofu said recently in a media interview that he was worried. The preliminary statistical data from the Ministry of Agriculture of China recently showed that the total output of summer grain in the country this year reached 240.8 billion kilograms, an increase of 6.1 billion kilograms from the previous year, an increase of 1.6%, achieving an increase in production for five consecutive years. The harvest of the summer crops has given rise to Shen Bing’s “spiritual crisisâ€.
This starts with the sharp rise in potash prices. Since 2007, sulfur prices have skyrocketed, which led to the price increase of sulfur-based phosphate fertilizers. Then in April this year, China and BPC finally reached a price agreement for the 2008 potash import contract, FOB price was increased by US$400/ton on the basis of the mid-price of US$180/ton in 2007.
In fact, despite the increasing demand for potash in China, India, Vietnam, and Brazil in recent years, there is no shortage of potash fertilizer in the world. According to the International Fertilizer Industry Association, total global supply of potassium oxide was 35.54 million tons in 2008, with a total demand of 33.3 million tons.
According to the forecast of the International Fertilizer Industry Association, from 2007 to 2012, the potash fertilizer production capacity of virtually all potash-producing countries will have expanded. By 2012, global potash fertilizer production capacity will reach 50.3 million tons, which will increase by 22% on the basis of 2007. At the same time, global potassium demand was only 36.6 million tons. These data show that despite the global tension in the supply and demand balance of potash, the oversupply situation will persist.
So, why can imported potassium fertilizer prices continue to rise in the oversupply situation?
It is understood that the global potash resources are mainly distributed in Canada, the former Soviet Union and the Middle East. In recent years, with the expansion of potash fertilizer demand, the world's potash giants have gradually formed a community of interests in the face of consumer price negotiations. At the end of 2005, Sino-foreign negotiations on potash fertilizers began. In order to create potash supply shortages and raise the price of potash fertilizers, Canadian Potash Corp, US Magnus, BPC and other companies have announced production cuts and production cuts. “At present, the price increase in the world potash fertilizer market is no longer part of the market rules,†said Wu Xiyan, chairman of the China Phosphate Fertilizer Industry Association. In fact, reducing production and stopping production has become an important bargaining chip in the world price game for potash giants. The high profits generated in the market monopoly have become an important driving force for the sharp increase in potash prices.
The Chinese negotiating camps are fighting each other Faced with the price alliances of potash fertilizer sellers in the world, China has made great efforts, but the effect is not obvious. The potash negotiations in 2005 rose by RMB 40 and US$ on the basis of RMB 1,000/ton; in 2006 and 2007, they rose by US$ 25/ton and US$ 5/ton respectively; in 2008, the gains reached a staggering 400 USD/ Ton.
Whether it is "failure to defeat the game" or "failure to fight repeatedly," in the face of international monopoly power, China's fertilizer companies are indeed losing ground. Where is the crux of the problem?
The Chinese potash negotiators are mainly composed of two forces: one is two old trading companies Sinochem Corporation and China Agricultural Assets Group; the other are China Chemical Construction Corporation, Huarong International Trading Company and China-Arab Fertilizer Co., Ltd., China National Petroleum Corporation, Shandong Lubei Enterprise Group Corporation, Shandong Luxi Chemical Co., Ltd., Hubei Yangfeng Co., Ltd., and Liaoning Xiyang Special Fertilizer Co., Ltd. 6 production companies. Due to the conflict of interest between trading companies and production companies, there are always subtle contradictions among the 10 companies that have been given the right to import fertilisers. Among them, Sinochem Group, Zhongnong Group and the other 8 companies are in continuous disputes. In order to bridge the contradiction between imported fertilizer companies, in December 2005, the Ministry of Commerce convened a potash import meeting and formed a joint negotiation import mechanism. However, this joint negotiation import mechanism seems to have revealed all its drawbacks in the 2008 potash negotiations. The negotiated price increase of 400 U.S. dollars/ton was unexpected, and the conflict was also intensified.
An indisputable fact is that the domestic “buyers’ coalition†involved in potash negotiations has been fragmented.
According to the “internal rules†of the Potash negotiations, the eight companies outside Sinochem Group and China Agricultural Group cannot sign contracts directly, and can only sign contracts with subsidiaries of Sinochem Group and China National Agricultural Group. As a result of this rule, “8 companies have not actually received a ton of potash directly in recent years. This is an important reason why the domestic “buyer coalition†is not in alignment,†said Wu Sihai.
In February 2008, Sama, the Deputy Minister of Chemicals and Fertilizers of India, led a delegation to visit China. An important part of his trip is to seek cooperation with China on fertilizer negotiations.
Data show that China, India and Brazil account for nearly 70% of the world's potash fertilizer imports, and China and India account for 50%. “The consumption of potash in Brazil is relatively decentralized, but thanks to the government subsidies for Indian fertilizer, we can form an alliance with India and participate in the international potash game together.†Wu Sihai said. According to him, in the negotiations on potash fertilizer in 2006, due to the possibility of joint information between China and India, the international potash giant's negotiation attitude has changed rapidly from “do not accept price increases of 40 US dollars/ton to rise again†to “price increase of 25 dollars. / Ton" and quickly signed the contract.
Unfortunately, Samar’s visit has not been able to make breakthrough progress.
After China and India broke hands, the international potash giant quickly negotiated a price of USD 625/ton between India and Brazil. In April, Sino-foreign potash negotiations ended with the loss of Chinese companies. Potash prices sold to China surpassed India and Brazil, and the CIF price was almost US$700/ton.
Insufficient domestic self-development is another reason why China lost its position in the potash negotiations. China is not doing enough in the development and utilization of potash fertilizer resources.
Qinghai Lenghu Bindi Potash Fertilizer Co., Ltd. owns the mining rights of the 832.9 square kilometers of the Dayantan of the Quanteyi Potassium Deposit in Lenghu Town. Dayantan mining area is rich in potassium, sodium, magnesium, lithium, boron and other resources. It has been proven that the brine contains reserves of 118 million tons of potassium chloride, and the reserves of polyhalite contains 210 million tons of potassium sulfate. Its resources are The potential economic value amounts to trillions of yuan. It is understood that in the cold lake large salt flats where Bindi Potash Co., Ltd. is located, there is actually great potential for tapping local potash fertilizer resources. According to local officials, Cold Lake is 520 kilometers away from Golmud. Many local infrastructure such as fresh water and electricity are not able to keep up, resulting in investors who are optimistic about potash resources. This is an important factor that restricts the development of local potassium mineral resources.
Because of these problems, many companies that wish to invest lose confidence.
In fact, Bindi Potash Corp. was in 2003 when the Jinan Mining Company of Qinghai Province acquired the mining rights of the Da Yantan K deposit at a price of about 10 million yuan. The reason for the transfer of Venus is mainly because it feels that it is not possible to transfer. At the time of the transfer, the mine was almost unmanned, and it continued to flow for the second time in a row. After Bindi Potash Company won the major salt flat, it carried out infrastructure construction from scratch. The relevant person of the company said: "In the first 4 years, the company basically did nothing else, and all the energy was spent on the infrastructure."
Ma Lin, deputy chief engineer of the Qaidam Integrated Geological Survey Team in Qinghai Province, said that although the reserves of potassium in Qinghai Province are less than 1% of the world's total, once the local potassium salt resources are fully mined, China’s potash fertilizer supply will be greatly increased, effectively replenishing The current shortage of potash fertilizer can also enhance our country’s ability to negotiate with international giants.
The relevant data shows that although China's potash production in recent years has seen significant growth through increased exploration efforts, China's potassium salt self-sufficiency rate is still only 31% by 2007.
“The safety of potash fertilizers is related to food security. China should further increase its potash development efforts. China’s failure to negotiate on many resource-based primary products can be largely attributed to lags and mistakes in the strategic layout and lack of bargaining chips. This is the case with oil and steel. The same is true for potash fertilizer." Wu Sihai said.
The higher the price of imported potassium fertilizer is, the higher the negotiation price is
“Do you respect Chinese farmers?†Wu Sihai, former vice chairman of the Hebei Provincial People's Political Consultative Conference, former chairman of the International Fertilizer Industry Association and former general manager of China-Afghanistan Fertilizer Co., Ltd., questioned an international potash giant at a recent meeting. But the angry voice can not stop the pace of rising potash imports. The Belarusian potash fertilizer company (BPC) is currently the world's largest potash fertilizer company. In 2008, based on continuous price increases in previous years, BPC has suddenly increased the price of potash fertilizer sold in China by US$400/ton. Even so, the total supply of potash in the world is still greater than the total demand.