International grain prices remained high, and the growth of planting area supported the demand for chemical fertilizer. After the covid-19 outbreak, countries have paid more and more attention to food security, and international food prices began to rise in the second half of 2020.
Since the beginning of 2022 (as of March 18), affected by the conflict between Russia and Ukraine, CBOT corn, soybean and wheat futures prices have increased by 25.11%, 25.35% and 37.62% respectively. The rise in grain prices and the improvement of planting income have promoted the growth of grain planting area. According to the data of the U.S. Department of agriculture in March this year, it is expected that the global sown area of soybean, corn and wheat will increase by 1.15%, 2.3% and 0.51% respectively year-on-year in 2021 / 2022. In addition, according to the prediction of oecd-fao Agricultural Outlook, the global harvest area of corn and soybean will increase by 2.36% and 2.81% respectively by 2030 compared with 2021. The long-term increase of Shenzhen Agricultural Products Group Co.Ltd(000061) harvest area is conducive to the steady increase of chemical fertilizer demand.
Potash fertilizer: China is highly dependent on imports. Since 2016, China’s dependence on potassium chloride imports has been above 50%, reaching 57.54% in 2021. At present, grain prices remain high, the planting area is expected to continue to grow, and the demand for potassium fertilizer is strong. The superposition of the conflict between Russia and Ukraine and the sanctions imposed on Belarus have restricted the export of potassium fertilizer from Russia and Belarus, exacerbated the global supply tension, and the international price of potassium fertilizer is expected to remain high. At the same time, China’s dependence on potash fertilizer imports is high, and the synchronization between China’s potash fertilizer price trend and the international price trend is becoming stronger. At present, China’s potash fertilizer inventory is low, which supports the price of potash fertilizer.
Phosphate fertilizer: the legal inspection of chemical fertilizer temporarily restricts the export, and the price difference outside China is large. At present, affected by the export legal inspection policy, the export of phosphate fertilizer is limited. In the future, if the policy is relaxed and the export is restored, the prices of monoammonium phosphate and diammonium phosphate in China are expected to rise, the price difference outside China is reduced, and the industry profit may be improved.
Nitrogen fertilizer: the price of urea is rising, and the industrial inventory is at a low level. As of March 18, the price of urea (small particles) in Shandong, China was 2960 yuan / ton, up 37.67% year-on-year and 14.73% year-on-year; The total inventory of China’s urea industry was 560200 tons, a year-on-year decrease of 34.67%, and 53.03% lower than the same period in 2020, which is the low level in recent five years. Driven by the demand for urea from spring ploughing, the price of urea may remain high under the low inventory of the industry. At the same time, under the background of high oil price, Chinese coal to urea enterprises have cost performance.
Investment suggestion: after covid-19 epidemic, countries pay more attention to food security, international food prices remain high, grain planting area increases, supporting the demand for chemical fertilizer. In terms of potash fertilizer, it is suggested to pay attention to Qinghai Salt Lake Industry Co.Ltd(000792) ( Qinghai Salt Lake Industry Co.Ltd(000792) ), Zangger mining ( Zangge Holding Company Limited(000408) ) and Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) ( Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) ); In terms of phosphate fertilizer, it is suggested to pay attention to Yunnan Yuntianhua Co.Ltd(600096) ( Yunnan Yuntianhua Co.Ltd(600096) ), Xinyangfeng Agricultural Technology Co.Ltd(000902) ( Xinyangfeng Agricultural Technology Co.Ltd(000902) ), Hubei Yihua Chemical Industry Co.Ltd(000422) ( Hubei Yihua Chemical Industry Co.Ltd(000422) ), Hubei Xingfa Chemicals Group Co.Ltd(600141) ( Hubei Xingfa Chemicals Group Co.Ltd(600141) ); In terms of nitrogen fertilizer, it is suggested to pay attention to Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) ( Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) ).
Risk warning: the relaxation of fertilizer export policy is less than expected; The change of the situation in Russia and Ukraine leads to the risk of drastic fluctuations in global energy prices and food prices; Global climate change leads to the risk of declining grain planting area; The production capacity of the chemical fertilizer industry exceeded expectations, increasing risks; Industry competition intensifies risks, etc.
