Core view
1. Recently, China sulfuric acid industry association proposed to open up the supply chain of sulfur resources to ensure the normal operation of phosphorus and compound fertilizer enterprises. As an important raw material for the production of phosphorus and compound fertilizer, the rising price and tight supply of sulfur have a direct impact on the normal operation and production of Chinese phosphorus and compound fertilizer enterprises. In terms of price, China’s sulfur price has risen sharply since 2021. As of December 31, 2021, the average price of sulfur in China’s market has been reported at 2460 yuan / ton, with an annual increase of 158.9%. Since the beginning of 2022, with the rising demand for fertilizer for spring ploughing, the price of sulfur has further increased. From the beginning of the year to March 26, the single ton has increased by 890 yuan, or 36.2%. In terms of supply, China is highly dependent on sulfur import, and the price is greatly affected by the international market. In 2021, China’s total sulfur consumption was 17.021 million tons, including 8.535 million tons of imports, with an import dependence of 50.1%. Since 2021, the international sulfur price has risen sharply. As of March 26, 2022, the FOB spot price of sulfur in the Middle East was reported as US $405 / ton, an increase of 321.9% compared with us $96 / ton at the beginning of 2021. At present, the sulfur demand is released during the spring ploughing period, and the port inventory is running at a low level. Imported sulfur is an important raw material for phosphate fertilizer production in China, of which 1 / 3 flows into Zhenjiang port and Nanjing Port Co.Ltd(002040) port in Jiangsu, and then is transported to Anhui, Hubei and other major phosphate fertilizer production places in China. At present, the demand for sulfur in the lower reaches is in a period of low spring ploughing, which leads to a tight supply of sulfur in the lower reaches. As of March 26, 2022, the port inventory of sulfur Zhenjiang port in China was reported to be 330000 tons, 23.6% of that at the beginning of 2020, at a low level in recent two years. At present, at the initiative of the sulfuric acid industry association, opening up the sulfur supply channel will help stabilize the price, but the downstream demand is strong during the spring ploughing period, and the tight supply situation may continue. We expect that China’s sulfur price may remain high in the first half of 2022, and the sulfur industry is expected to rise.
2. As of March 25, 2022, the price index of China’s chemical products reported 5887 points, up 3.1% on a weekly basis. Chemical products rose or fell, with polymerized MDI up 3.3% and acrylic acid down 6.9%. In terms of aggregated MDI, the main reason for the price rise is the decline of overseas supply. BASF of the United States is expected to overhaul for 3 weeks due to equipment failure; In terms of acrylic acid, the price decline is mainly affected by the demand side. The downstream acrylate market continues to be weak, the terminal demand is weak, and the logistics and transportation are limited due to public health events.
3. In the past week, the international crude oil price has increased significantly. As of March 25, 2022, the main futures price of Brent crude oil has been reported at US $120.7/barrel, up 11.8% on a weekly basis; The main futures price of WTI crude oil was reported at US $113.9/barrel, up 8.8% this week. The rise of crude oil price is mainly affected by the increase of supply side risk. The two oil facilities in Jeddah and Jizan in Saudi Arabia were attacked by missiles on the same day, and the crude oil supply was at risk. At the same time, OPEC’s production increase cannot make up for the supply gap caused by the obstruction of Russian crude oil export.
4. Market review. Last week, among the 33 tertiary sub industries of CITIC chemical, 14 sectors rose or remained flat and 19 sectors fell. Among them, potassium fertilizer block increased the most, with an increase of 9.8%; Polyurethane sector fell the most, with a decline of 2.3%. In terms of individual stocks, the top three weekly gains were Zhejiang Zhongxin Fluoride Materials Co.Ltd(002915) , Zhejiang Yongtai Technology Co .Ltd(002326) , Jiangsu Yabang Dyestuff Co.Ltd(603188) , with weekly gains of 44.0%, 30.0% and 20.6% respectively; The top three weekly declines were Yunnan Energy Investment Co.Ltd(002053) , North Chemical Industries Co.Ltd(002246) , Elion Clean Energy Company Limited(600277) , with weekly declines of 20.8%, 19.5% and 17.7% respectively.
Investment advice
Under the prosperity of sulfur industry, relevant targets may benefit, such as PetroChina, Sinopec Shanghai Petrochemical Company Limited(600688) , Hengli Petrochemical Co.Ltd(600346) etc.
Risk tips
Upgrading of safety and environmental protection policies, repeated outbreaks abroad, geopolitical changes, etc.
