Core view
1. The "14th five year plan" was issued, emphasizing the improvement of the concentration of the pesticide industry. Recently, the national pesticide industry development plan for the 14th five year plan jointly issued by the four departments pointed out that the next development direction of the pesticide industry is to improve the industrial concentration and promote the industrialization of pesticide enterprise groups. At present, China's pesticide industry is in a high boom period. Since 2021, pesticide prices have risen sharply. Taking glyphosate as an example, as of February 18, 2021, the market price of glyphosate in China was reported as 75810 yuan / ton, up 163.23% year-on-year. The rise of pesticide prices is mainly affected by Shenzhen Agricultural Products Group Co.Ltd(000061) price rise and cost increase. In terms of Shenzhen Agricultural Products Group Co.Ltd(000061) , as of February 16, 2022, the CBOT futures settlement prices of the world's main grain corn, wheat and soybean increased by 67.0%, 38.1% and 75.9% respectively compared with the beginning of 2020. The rise of downstream Shenzhen Agricultural Products Group Co.Ltd(000061) prices has played a supporting role in pesticide prices. In terms of cost, in 2021, the price of bulk commodities rose sharply and the cost of pesticide products increased, which promoted the price rise of pesticide products. China has a large number of pesticide enterprises and low industry concentration. The implementation of the 14th five year plan will help to improve the industry concentration. According to the data of the Ministry of industry and information technology, there are 1707 enterprises with pesticide production qualification in China, and only 26 enterprises with annual income of more than 1 billion in 2020.
Taking glyphosate as an example, in 2022, the national glyphosate production capacity CR3 was about 47.4%, and the production capacity of other enterprises accounted for less than 10%, so the production capacity was relatively scattered. The improvement of industry concentration is expected to prolong the business cycle.
China has a high proportion of pesticide exports, but it lacks pricing power in the world. In 2019, China's pesticide export volume was 2.254 million tons, accounting for about 65.2% of the country's total output. China's agricultural products are mainly concentrated in the international price war due to the high proportion of agricultural products. Improving industry concentration means promoting supply side reform, so as to improve the comprehensive strength of China's pesticide industry, enhance pricing power and prolong the business cycle. In the long run, combined with the direction of the 14th five year plan, the leading enterprises are expected to usher in new opportunities for development.
2. As of February 18, 2022, the price index of China's chemical products reported 5499 points, down 0.6% on a weekly basis. Among them, caustic soda rose 8.3% and butadiene fell 6.2%. In terms of caustic soda, the main reason for the price rise is the maintenance of the main caustic soda plant, the reduction of inventory and the positive demand for alumina in the downstream; In terms of butadiene, there was a short jump in the news of sudden shutdown of Korean units. In the second half of the week, China's demand was not followed up enough, and the external market was not boosted as expected. After the market rose, it gradually fell back.
3. In the past week, international natural gas prices have been running at a high level. As of February 18, 2022, the closing price of us NYMEX natural gas continuous futures was US $4.45/million BTU, up 11.2% this week. The main reason for the rise in us natural gas futures prices is that last week, the market predicted that the temperature in early March will be significantly lower than previously expected, and the heating demand will also be higher than expected. In addition, although Europe has dropped, it is still at a high level compared with the same period last year.
4. Market review. Among the 27 Shenwan level III sub industries in the chemical industry, 22 sectors rose or remained flat last week, and 5 sectors fell. Among them, the civil explosive products sector increased the most, with an increase of 12.5%; The inorganic salt sector had the largest decline, with a decline of 2.2%. The top three weekly increases were Aba Chemicals Corporation(300261) , Henan Qingshuiyuan Technology Co.Ltd(300437) , * ST Chengxing, with weekly increases of 66.7%, 25.5% and 21.2% respectively; The top three weekly declines were Shanxi Huhua Group Co.Ltd(003002) , Skshu Paint Co.Ltd(603737) , Poly Union Chemical Holding Group Co.Ltd(002037) , with weekly declines of 21.7%, 13.5% and 12.4% respectively.
Investment advice
Relevant targets under the boom of pesticide market may benefit, such as Jiangsu Yangnong Chemical Co.Ltd(600486) , Lier Chemical Co.Ltd(002258) , Nantong Jiangshan Agrochemical & Chemicals Co.Ltd(600389) .
Risk tips
Upgrading of safety and environmental protection policies, abnormal fluctuations in pesticide prices, repeated overseas epidemics, blocked shipping, etc.
