Event: on February 24 Beijing time, the geopolitical conflict between Russia and Ukraine escalated in an all-round way. Russian President Vladimir Putin announced a special military action against the Donbas region of Ukraine. As of 8 p.m. Beijing time on February 24, Britain and its allies announced their agreement to implement a “large-scale package” of sanctions against Russia.
Comments:
Russia Ukraine conflict affects wheat and other grain exports, and international grain prices may rise further
Russia and Ukraine are the global trade centers of wheat, corn and sunflower oil. At the same time, the arable land area of Ukraine ranks first in Europe and is known as the “European granary”. According to the data of the US Department of agriculture, in 2021, the export volume of sunflower oil from Russia and Ukraine accounted for 28% and 50% of the global export volume respectively; In 2021, Russia and Ukraine accounted for 17% and 10% of global wheat exports respectively. Russia and Ukraine were the world’s first and fifth largest wheat exporters respectively.
Due to the Russian Ukrainian war, there is obvious uncertainty in the production of local grain enterprises in Ukraine, and the planting and production of Shenzhen Agricultural Products Group Co.Ltd(000061) represented by wheat and corn will be significantly affected. In addition, as the United States, the United Kingdom and the European Union have said that they will impose sanctions on Russia, the subsequent pressure on Russian commodity exports represented by Shenzhen Agricultural Products Group Co.Ltd(000061) will increase significantly, which will further push up international food prices. Since the outbreak of the epidemic, due to the attention of countries around the world to food security, international food prices have continued to rise. According to the settlement data of Chicago Futures Exchange (CBOT) on February 23 local time, the prices of wheat, corn, soybeans and other products are at the highest point in recent five years. The prices of three representative food products have increased by 38% since the beginning of 2021 41% and 27%.
Russia is a major exporter of chemical fertilizer. After being sanctioned, the pressure on global chemical fertilizer supply will surge
Benefiting from abundant natural gas and potassium resources, Russia occupies an important position in the international fertilizer supply chain. According to jinlianchuang data, Russia is one of the three largest exporters of chemical fertilizers in the world. In terms of potassium resources and potash fertilizer, according to the usgs2021 report, the global proportion of Russian potassium ore production in 2020 was 18%, ranking second in the world, second only to Canada; Russia’s potash reserves account for 16% of the world, ranking third in the world. In 2021, Russia exported 11.9 million tons of potash fertilizer, with a year-on-year increase of 24.2%, a record high. In terms of nitrogen fertilizer, the export volume of inorganic nitrogen fertilizer in Russia reached 14.46 million tons in 2021, with a year-on-year increase of 5.3%, also the highest in history. In addition, the supply of nitrogen fertilizer in Russia will account for 16.6% of the global production of natural gas in 2020, which will also account for the first proportion of natural gas production in the world. In terms of phosphate fertilizer, according to USGS data, Russia’s phosphate rock output ranked fourth in the world in 2020, and it is also the third largest phosphate fertilizer exporter in the world. In the follow-up, with the implementation of sanctions against Russia by European and American countries, there will be an obvious shortage of global fertilizer supply, which will raise the global fertilizer price.
Investment suggestion: the outbreak of the Russian Ukrainian war will have a serious impact on the global supply of grain and chemical fertilizer, and then push up the prices of relevant products, which may be good for relevant Chinese enterprises. It is suggested to pay attention to Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qinghai Salt Lake Industry Co.Ltd(000792) , Qingdao East Steel Tower Stock Co.Ltd(002545) of potash fertilizer sector, Guizhou Chanhen Chemical Corporation(002895) , Hubei Xingfa Chemicals Group Co.Ltd(600141) , Yunnan Yuntianhua Co.Ltd(600096) , Chengdu Wintrue Holding Co.Ltd(002539) , Xinyangfeng Agricultural Technology Co.Ltd(000902) , Sichuan Development Lomon Co.Ltd(002312) , Hubei Yihua Chemical Industry Co.Ltd(000422) , Anhui Sierte Fertilizer Industry Ltd.Company(002538) , Kunming Chuan Jin Nuo Chemical Co.Ltd(300505) of phosphorus fertilizer and phosphorus chemical industry sector, and Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , Luxi Chemical Group Co.Ltd(000830) , Yangmei Chemical Co.Ltd(600691) of nitrogen fertilizer sector.
Risk analysis: geopolitical conflicts continue to escalate, downstream demand is less than expected, product and raw material prices fluctuate sharply, and import and export trade risks.
