At the 2023 World Potash Conference and Golmud Salt Lake Forum on June 8, CRU potash analyst Ju Hao predicted that the global demand for potassium chloride in 2023 will increase by 8.9%, reaching 64.2 million tons, but compared with about 71 million tons in 2021 and 2020, there is still a certain gap. By 2027, 8.8 million tons of excess capacity will be added.
Ju Hao believes that compared with 2022, this year's global crop inventory consumption ratio will be increased to a certain extent, but it is still below 18%, and wheat, corn, soybeans, rice and other food prices are expected to decline, but will remain at a medium high level. As agricultural prices generally remain high, crop acreage in the United States and Brazil is expected to continue to increase in 2023, supporting fertilizer demand and contributing to the recovery and growth of global potash consumption.
From the global fertilizer affordability index, the current global urea affordability index has fallen to a relatively low, phosphate fertilizer and potassium fertilizer is still hovering at a medium high, that is to say, the demand for potassium chloride this year is difficult to significantly increase, the global potassium chloride demand is still taking some time to fully recover. Ju Hao introduced that CRU expects that the global demand for potassium chloride will increase by 8.9% in 2023, reaching 64.2 million tons, but compared with the level of about 71 million tons in 2021 and 2020, there is still a certain gap.
In the next five years, the global nominal capacity of potassium chloride will increase by 8.4 million tons, while 650,000 tons of potassium chloride capacity will be withdrawn, a net increase of 7.7 million tons of potassium chloride capacity, and the concentrated release of new capacity is mainly in 2023 and 2024 and 2027. Not only that, in the medium term, the increase in effective capacity is also very huge. Ju Hao expects that by 2027, the global effective production capacity will increase by 16.7 million tons compared with 2021, and during this period, the global demand for potassium chloride is expected to increase by 7.9 million tons, which means that the global effective overcapacity will increase by 8.8 million tons.
In 2022, the biggest impact on global potash supply is the Western sanctions on Russia and Belarus. It is reported that in 2022, the supply of potash in Russia and Belarus has declined sharply, Belarus's exports have been slashed by 60% year-on-year, down to 4.9 million tons, and Russia's exports have fallen by more than 30% year-on-year, down to less than 8 million tons. Ju Hao expects Belarus' potash exports to recover significantly in 2023, and Russian exports will return to a normal low level. CRU expects Belarus' supply to grow to 7.8 million tons in 2023 and Russia's to grow slightly to 8.2 million tons.
Ju Hao introduced that the sharp rise in the price of potassium chloride in 2021 and 2022 inhibited the demand for potassium chloride in China, and the demand for potassium chloride in China dropped to the level of 14 million tons in 2022. At present, with the decrease in the price of potassium chloride, CRU expects that the demand for potassium chloride in China will return to the level of 15 million tons in 2023.
In terms of inventory, Ju Hao pointed out that China's potassium chloride inventory will continue to remain high in 2023. He introduced that the potassium chloride carried over to this year in 2022 is about 6 million tons, the domestic potassium chloride production of nearly 7 million tons, and the conservative estimate of 8 million tons of potassium chloride imports, taking into account the expected demand of 15 million tons this year, the end of 2023 China's full caliber potassium chloride inventory is expected to remain at more than 6 million tons.
Due to the decline in potash prices, global potassium chloride demand will gradually recover in 2023. Although Western sanctions are still in place, supply from Russia and Belarus will continue to increase, production from Canada will also continue to increase, and the Chinese market will be adequately supplied in 2023. Ju Hao pointed out that although India and China have signed large contracts, but because of sufficient supply, it is expected that the global potassium chloride price will continue to fall in 2023, the spot market does not rule out the possibility of falling below the 307 US dollars signed by China before the end of this year, CRU expects that the global potassium chloride price will bottom out in mid-2024, and stabilize.
