China to release potash reserves

Move said to be intended to ensure supply, stabilize prices

(DarcyMaulsby/iStock/Getty Images)

Beijing | Reuters –– China’s state planner on Wednesday said the government would take measures to keep supply and prices of fertilizers stable, including releasing potash fertilizer reserves and ensuring imports reach farmers as it looks to bolster food security.

The National Development and Reform Commission (NDRC) said it was one of 13 government departments that had issued a notice requiring companies to prioritize supply of raw materials and energy to fertilizer makers.

Shipping capacity for fertilizer imports will be secured and capacity utilization rates at fertilizer firms increased, it added.

China relies on imports of potash, widely used as a fertilizer, for about half its total annual demand.

Supply is “very tight” largely due to a lack of import contracts agreed with suppliers earlier in the year, said Humphrey Knight, senior potash analyst at CRU.

Prices for potassium chloride, the main ingredient in potash fertilizers, had leapt 61 per cent since the start of 2021 to 3.95 yuan (78 cents Cdn) per kilogram by the end of July, the NDRC noted.

“Affected by factors such as rising raw material prices and tight domestic supply, domestic fertilizer and pesticide prices will remain high,” the NDRC said, noting that both were key to agricultural production and people’s livelihoods.

“Controlling their prices within a reasonable range plays a very important role in ensuring farmers’ income and enthusiasm for growing grain, and ensuring national food security,” it added.

Knight said the implications of releasing potash reserves were not yet clear.

China has repeatedly moved to try to tame high commodity prices this year, including by selling off state metal reserves for the first time in over a decade. On Friday it will hold its first auction of strategic crude oil reserves.

Chinese prices of urea, another fertilizer ingredient, have also gained around 64 per cent so far this year, boosted by high coal prices and concerns over lower supplies amid a crackdown on high energy consuming projects.

Urea futures on the Zhengzhou Commodity Exchange rose six per cent on Wednesday, hitting a record high of 2,848 yuan (C$561) per tonne.

— Reporting for Reuters by Colin Qian, Tom Daly and Emily Chow.

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