BOABC: Salt Lake is Facing Debt Crisis, and There are Uncertainties on Future Development

On August 16th, the creditor Geermu Taishan Industry Co., Ltd, filed for Salt Lake’s bankruptcy to Xinning Intermediate People’s Court for the reason that Salt Lake can’t cover its debt and has obviously no liquidity. Currently, there are huge uncertainties whether the petition in bankruptcy of Salt Lake from the former creditor is accepted by the court or whether the company can enter the bankruptcy procedure.    
 
Qinghai Salt Lake Industry is China’s biggest potassium chloride producer, with designed potash capacity of 5 million MT. MOP output in 2018 was 4.8338 million MT, taking up more 40% in the total output in China. In 2018, Salt Lake’s operating revenues were 17.89 billion RMB, of which operating revenues of MOP accounted for 41.65%, and the gross profit rate reached to 71.94%. However, held back by chemical projects and metal magnesium integration project, the loss of Salt Lake in 2018 still was 3.447 billion RMB. The debts that haven’t been paid only were 4.39 million RMB.    
 
In the first half of 2019, Salt Lake reduced the loss by increasing the output of MOP. During January and June of 2019, Salt Lake’s MOP output was 2.4763 million MT, up 28.11% year on year. It planned to continue to increase potash output to improve the performance in the second half of 2019.
 
Currently, there have been uncertainties about Salt Lake’s future development. If the court accepts the restructuring application, it will be good for optimizing the structure of asset-liability and improving the ability of operation and profits. MOP production won’t be influenced. If the restructuring fails, it will declare bankruptcy, which possibly would influence MOP production and influence the supply of potash in China.