China MOP imports up on strong growing season

First-quarter MOP deliveries to China were up by around 20pc on a year earlier, as the country expands its planted areas and swine count from last year, pushing up demand for potash.

First-quarter MOP imports were 2.59mn t, up from 2.16mn t in the same period last year. March imports alone were 1.13mn t, up from 775,000t a year earlier.

Canada sent the most of any country to China in the period, at 789,000t — a 30pc market share — followed by Russia, with 696,000t or a 27pc market share. Belarus sent 635,000t for a 25pc market share, while Israel and Jordan had 9pc and 5pc shares, respectively.

China is likely to see an increase in its planted area this year, as the government ensures grain output remains above the 650mn t mark. China's wheat-planted area has declined over the past four years, but the government in October announced plans to raise the guaranteed purchase price for the grain in an attempt to encourage higher production. China has also announced its intention to increase its corn and soy sowing area in 2021, and its swine levels have bounced back to 2017 levels after falling on an outbreak of African swine fever in 2018-19.

The increase in swine levels and grain output are driving MOP demand, and given that Chinese potash producer QHSL has limited scope to increase production, China must continue to rely on more imported potash to cover the rise.

Domestic supply is tightening as NPK producers ramp up purchases. QHSL's MOP stocks are reported to be falling, and port stocks slipped slightly to 2.4mn-2.45mn t last week, down from 2.5mn-2.6mn t a week earlier.

The tightening supply has pushed up domestic standard MOP prices to the equivalent of $362/t on a delivered basis, compared with the annual contract price of $247/t cfr China ports. BPC settled MOP contracts with the Chinese buying consortium at a headline price of $247/t cfr in February, for delivery by the end of this year. This was a $27/t increase from the previous contract, but the price was deemed too low by other key producers.

Aside from BPC, no other producer has publicly announced a contract settlement with China's consortium of buyers. But Argus understands that some other suppliers have already settled quietly, at levels in line with BPC's $247/t cfr headline price from 10 February.

MOP shipments to China totalled 8.8mn t in 2020, a 3pc drop compared with 2019, with deliveries peaking in September at 1.2mn t.

By Ewan Thomson