China Fertilizer Market Update: Potash Tightness and Phosphate Stability

I. Potash Market: Tight Supply and Rising Prices Amid Strategic Standoff; Pre-Spring Ploughing Stockpiling Underway, Tight Circulation Becoming the Norm

Recently, China’s domestic potash market has exhibited an unusual pattern of shrinking volumes alongside rising prices. Despite persistent market rumors suggesting policy coordination through long-term contract allocations and direct-supply releases, actual circulating volumes remain tight. Against this backdrop of reduced availability, prices have edged upward, placing the market in a phase best described as “deep currents beneath calm waters.”

The core market debate centers on pre-holiday price consolidation and whether post-holiday demand concentration could trigger a stronger upward price movement.

This structural tension stems from the combined impact of three key factors:

First, the seasonal off-season effect has become more pronounced. As the Lunar New Year approaches, operating rates at downstream compound fertilizer plants continue to decline, with some facilities entering maintenance shutdowns ahead of schedule. As a result, short-term potash procurement demand has weakened.

Second, supply-side structural tightness has intensified. January is traditionally a maintenance season for potassium chloride production facilities, pushing domestic potash output to its annual low, with estimated production at approximately 400,000 tons for the month.

Most producers prioritize direct supply to downstream compound fertilizer plants, significantly compressing market circulation volumes. Small and medium-sized traders largely have no available inventory, while winter weather conditions further constrain logistics efficiency, leading to pronounced regional shortages.

Third, imported supply remains unstable. Cross-border trade arrivals have fallen short of expectations, compounded by volatility in the international potash market, maritime logistics bottlenecks, and export policy adjustments by major producing countries.

Although some cargoes have arrived via China–Europe rail routes and ports, the widespread “fast-in, fast-out” pre-sale model adopted by traders has prevented effective replenishment of port inventories, keeping market circulation persistently tight.

The coexistence of dual pricing mechanisms—official guided prices and market-based prices—has become a defining feature of the current potash market, amplifying price sensitivity.

Direct-supply channels lock in most low-priced volumes, leaving publicly traded spot supply scarce and highly concentrated among large traders and producers.

Market self-regulation capacity has weakened, while companies excluded from direct-supply lists face firm market prices and pronounced price differentiation.

On the demand side, structural divergence is evident.

Compound fertilizer producers, the primary consumers of potash, have reduced procurement due to the agricultural off-season and pre-holiday maintenance, although large enterprises maintain production through direct-supply channels. In contrast, small traders face tightening supply quotas, exacerbating market segmentation.

Meanwhile, raw material demand from certain chemical industries provides a price floor, preventing sharp declines. Prolonged high-price volatility has gradually improved farmers’ acceptance of elevated potash prices, while industrial buyers remain cautious. Dealer cash flow pressure limits payment enthusiasm, and compound fertilizer producers generally adopt a “price stability with volume assurance” strategy, resulting in subdued trading activity.

At its core, persistent circulation tightness in the potash market reflects structural resource constraints and limited supply elasticity. China’s potash reserves account for only about 4% of global reserves,

predominantly in difficult-to-extract brine deposits, limiting capacity expansion. Import dependence exceeds 60%, while supply fluctuations from Russia, Belarus, and Canada, combined with Red Sea shipping risks, further heighten uncertainty.

Overseas projects in Laos backed by Chinese enterprises have yet to form stable supply. Consequently, 70–80% of available supply is controlled by large trading entities, leaving small traders chronically undersupplied. Since 2025, port inventories have consistently remained below safety thresholds, making short-term supply–demand relief unlikely.

Looking ahead, the domestic potash market is expected to maintain a “tight supply versus weakening demand” standoff in the near term. Policy support and physical tightness will coexist, the dual-pricing structure will persist, and while direct-supply prices remain stable, market prices are likely to stay firm.

Ahead of the spring ploughing season, prices are expected to fluctuate within a narrow high-level range. Historically, January to March represents a critical price accumulation period. Post-holiday spring farming activity is expected to lift compound fertilizer operating rates and release concentrated potash demand.

However, policy-driven price stabilization expectations may limit extreme volatility, while persistent circulation tightness is likely to increase price sensitivity. Key variables to monitor include import arrival schedules, compound fertilizer operating rates, and the intensity of policy intervention.

II. Phosphate Fertilizer Market (January 30 – February 5, 2026): Divergent Raw Materials, Stable Finished Products, Thin Pre-Holiday Trading

Last week, China’s phosphate fertilizer market displayed a pattern of diverging raw material trends, stable finished product prices, and subdued trading activity. Influenced by the approaching Lunar New Year, raw material cost fluctuations, and cautious downstream procurement, the market saw no major price swings. The focus remained on raw material negotiations and execution of existing finished-product orders.

(1) Raw Materials Market:

1. Phosphate Rock:

Overall market conditions remained stable, with no price changes across major producing regions in northern and southern China. Producers focused on fulfilling existing delivery contracts, while downstream buyers replenished inventories on a demand-driven basis, with no signs of concentrated purchasing. This trading pattern is expected to persist ahead of the holiday.

On the supply side, regional divergence was evident: most mines in Hubei were idled, southwestern regions prioritized shipments, and northern regions focused on contract execution. Downstream phosphate fertilizer plants maintained stable operating rates, mainly producing for winter stockpiling and spring ploughing. Supported by demand from purified phosphoric acid producers, concentrate prices remained firm.

On the import side, international phosphate rock markets showed limited change, with major domestic importers—primarily in southern China and along the Yangtze River—making inquiries strictly on an as-needed basis.

2. Sulfur:

Sulfur prices experienced wide-range volatility with a downward bias, with transaction prices along the Yangtze River around RMB 4,130/ton. Domestic port inventories stood at 1.82 million tons, slightly lower week-on-week. Market sentiment fluctuated sharply: early-week electronic trading declines triggered panic, followed by a rebound midweek that restored rational sentiment. Divergence between buyers and sellers remains significant.

In the spot market, Yangtze River port transactions were relatively active. As bearish factors from industrial and trading pressure-buying were gradually absorbed, sellers’ willingness to cut prices weakened, leading to a price rebound. Internationally, negotiated flow prices remained firm, though easing U.S.–Iran tensions reduced buyers’ appetite for chasing higher prices. Attention should remain on new contract situation.

3. Sulfuric Acid:

The sulfuric acid market remained stable to firm, with notable regional divergence. Central China and Guangxi saw rising negotiation benchmarks due to tightening supply and elevated raw material costs. In Hubei, major producers operated with low inventories, supporting price increases driven by downstream demand. In Guangxi, higher pyrite prices pushed sulfuric acid prices upward.

Downstream demand also diverged: phosphate fertilizer demand remained strong due to spring farming needs, new energy sector demand continued to expand, while titanium dioxide and other chemical sectors saw reduced operating rates and slower procurement.

As the holiday approaches, trading has become more cautious, with purchases largely limited to essential needs. For sulfur-based acid, although cost support weakened slightly following sulfur price corrections, costs remain elevated and producers maintain firm quotations. In the short term, the market is expected to remain generally stable before the holiday, with localized fluctuations. The impact of holiday logistics shutdowns on circulation warrants close monitoring.

4. Synthetic Ammonia:

The ammonia market continued to weaken, with prices declining RMB 20–130/ton last week.

On the supply side, facilities in North and East China previously under maintenance continued to restart, while gas-based units in Southwest China are expected to resume operations, resulting in ample overall supply with further increases expected. Only localized maintenance outages created temporary supply gaps.

On the demand side, spring farming has not yet fully commenced; compound and phosphate fertilizer producers maintained only essential procurement. Industrial downstream sectors such as caprolactam and acrylonitrile operated at low rates amid losses, further suppressing demand.

Approaching the holiday, buyers adopted a cautious, hand-to-mouth purchasing strategy. Cost-side support was limited, as coal prices remained low and natural gas prices stable; gas-based ammonia capacity accounts for a small share, offering minimal overall support.

With no clear rebound drivers ahead of the holiday, the ammonia market is expected to continue weak and range-bound, with pronounced regional price differences.

(2) Phosphate and Compound Fertilizer Market: Stable Prices, Order-Focused, Light Trading

Last week, China’s finished phosphate fertilizer market remained generally stable, with producers concentrating on executing existing pending orders.

New transaction volumes were limited.

On the cost side, wide sulfur price volatility kept externally sourced raw material costs elevated, providing support for finished product prices and reducing producers’ willingness to cut prices.

On the demand side, as the holiday approaches, downstream distributors and end users remained cautious, prioritizing inventory digestion over new purchases. Only limited essential restocking orders were concluded. Influenced by cost pressures and cautious procurement sentiment, winter fertilizer arrivals were slightly below historical averages, and overall market activity remained muted. This stable pattern is expected to persist through the pre-holiday period.

III. Overall Summary

The current potash market is fundamentally characterized by strategic standoff and price accumulation. Shrinking volumes, rising prices, a dual-pricing structure, and tight circulation remain defining features. In the short term, prices are likely to fluctuate within a high but narrow range, while in the longer term, structural resource constraints and spring farming demand provide strong support. Post-holiday demand recovery may amplify price volatility.

In contrast, the phosphate fertilizer market continues to exhibit raw material divergence and finished product price stability. Last week saw mixed raw material trends, while finished product prices remained supported by costs amid subdued pre-holiday trading and weaker-than-expected winter stock arrivals. Going forward, attention should focus on spring farming demand release and post-holiday logistics recovery.

Overall, both markets are expected to remain largely stable ahead of the Lunar New Year, with the start of spring ploughing emerging as the key catalyst for subsequent market movement.

Attention: The above information is for commercial reference only due to the diversity of information collected, and Kelewell is not responsible for the authenticity of the data.