Preface:
In Q1 2022, the fertilizer industry still maintained a high degree of prosperity. On the supply side, affected by the geopolitical conflict between Russia and Ukraine, Russia and Belarus have been successively sanctioned by western countries, resulting in obvious uncertainty in the global fertilizer supply. At the same time, the impact of covid-19 epidemic on global fertilizer supply is also continuing. Therefore, the tight supply of chemical fertilizer in the world has prompted the price of chemical fertilizer to rise sharply year-on-year or month on month. On the demand side, under the background of rising global food prices, farmers’ planting willingness has increased significantly, and their demand for chemical fertilizer has increased. In addition, after the Spring Festival, the arrival of the peak season of spring ploughing also brings great benefits to the sales of chemical fertilizer enterprises, which promotes relevant enterprises to realize the simultaneous rise of volume and price.
Sector performance summary and Outlook:
Phosphate fertilizer and phosphate chemical industry: the product price remains high, the performance remains high, and the gradual opening of the leading export will be significantly beneficial. We take Guizhou Chanhen Chemical Corporation(002895) and other 8 representative listed enterprises as samples to summarize the Q1 performance of Listed Companies in phosphate fertilizer and phosphate chemical industry in 2022. In Q1 2022, eight sample companies in the phosphorus fertilizer and phosphorus chemical industry achieved a total revenue of 42.5 billion yuan, a year-on-year increase of 43.9% and a month on month increase of 17.9%; The net profit attributable to the parent company was 5.317 billion yuan, a year-on-year increase of 194.9% and a month on month increase of 46.9%. Among them, Yunnan Yuntianhua Co.Ltd(600096) as the largest enterprise in the sector, the operating revenue of Q1 in 2022 was the highest, reaching 15 billion yuan Hubei Xingfa Chemicals Group Co.Ltd(600141) with diversified agrochemical and new material products, it has higher net profit. The net profit attributable to the parent company in 2022q1 reached 1.72 billion yuan. At the same time, benefiting from the overall rise in the prices of chemical fertilizers, pesticides, wet electronic chemicals and other fine chemical products, the year-on-year growth rate of revenue and net profit attributable to the parent company in Q1 Hubei Xingfa Chemicals Group Co.Ltd(600141) 2022 was also the highest in the sector.
The substantial increase in the performance of Listed Companies in phosphate fertilizer and phosphate chemical industry is mainly due to the sharp rise in the prices of ammonium phosphate, compound fertilizer, phosphate rock, yellow phosphorus and other phosphorus chemical products. Due to the impact of the global covid-19 epidemic and the escalation of the geopolitical conflict between Russia and Ukraine, the global food price has increased significantly, the farmers’ planting willingness has increased significantly, and the demand for ammonium phosphate and compound fertilizer products has increased, thus promoting the price rise of ammonium phosphate and compound fertilizer products. Driven by the rising prices of ammonium phosphate and compound fertilizer products, the prices of raw materials such as upstream phosphorus ore and yellow phosphorus also increased significantly. The superposition of environmental protection policies and energy consumption policies has also further pushed up the prices of phosphorus ore, yellow phosphorus and other upstream raw materials of phosphorus chemical industry.
According to Ifind data, in Q1 2022, the price of monoammonium phosphate in China increased by 38.2% year-on-year and decreased slightly by 4.8% month on month; The price of diammonium phosphate increased by 37.3% year-on-year and 0.7% month on month; The price of compound fertilizer increased by 42.9% year-on-year and 2.4% month on month. In terms of raw materials, in Q1 2022, the price of phosphate rock in China increased by 71.0% year-on-year and 6.2% month on month; The price of yellow phosphorus rose 104.4% year-on-year and fell 22.1% month on month; The price of phosphoric acid increased by 101.4% year-on-year and decreased by 21.3% month on month.
The prices of all phosphate fertilizer and phosphorus chemical related products listed by US showed a year-on-year growth rate of more than 35%, of which the growth rate of raw material end is much higher than that of product end. In terms of month on month growth, due to the national policy of “ensuring supply and stabilizing price”, the prices of relevant products showed a high and slight fluctuation. The price of yellow phosphorus has slowed down due to the impact of the dual control policy of energy consumption, which is lower than the previous high, but the price level is still much higher than that in the same period in history.
In addition, the integrated industrial chain advantage of leading enterprises in the phosphate fertilizer and phosphate chemical industry sector is also one of the key reasons for the significant growth of performance. With its complete integrated industrial chain, leading enterprises have a high self-sufficiency rate of raw materials, which can effectively offset the negative impact brought by the rise of raw material prices, so as to achieve higher profitability under the background of rising product prices.
In the follow-up, we believe that the performance of phosphate fertilizer and phosphate chemical enterprises is expected to rise further, mainly due to two reasons: first, the export restrictions of phosphate fertilizer and phosphate chemical products are gradually liberalized, and the leading enterprises are expected to fully enjoy the price dividend; Second, the production capacity of new energy materials such as iron phosphate is gradually landing, opening up new growth space for relevant enterprises.
Due to the influence of the national policy of “ensuring supply and stabilizing price”, China’s exports of monoammonium phosphate and diammonium phosphate from November 2021 to February 2022 were at the lowest level in the same period since 2018. In March 2022, China’s exports of monoammonium phosphate and diammonium phosphate increased significantly month on month. Among them, the exports of monoammonium phosphate and diammonium phosphate in March 2022 were 102000 tons and 379000 tons respectively, with a month on month increase of 111% and 233% respectively. Although compared with historical data, the current export volume of monoammonium phosphate and diammonium phosphate is still in a low position, the significant increase in export volume in March 2022 releases a positive signal of the gradual liberalization of China’s export restrictions on ammonium phosphate.
In terms of price, under the influence of China’s export restrictions and the conflict between Russia and Ukraine, the price difference between China’s ammonium phosphate price and the international ammonium phosphate price continues to expand due to the continuous fermentation of supply shortage. As of April 29, under the assumption of fixed exchange rate (USD: RMB = 6.3:1), the international prices of monoammonium phosphate and diammonium phosphate were 95% and 115% higher than those in China, respectively. With the gradual liberalization of China’s ammonium phosphate export, leading enterprises, with their huge supply capacity, are expected to give priority to obtaining corresponding export quotas, so as to fully enjoy the dividend of international prices and help the company’s performance rise. In addition, under the influence of the increase of export prices, the prices of ammonium phosphate and other phosphorus chemical products in China will also rise further, so as to provide further benefits for leading enterprises.
In terms of new energy materials, since 2021, listed companies related to phosphorus chemical industry have planned the production capacity of a series of new energy materials and supporting materials such as iron phosphate and lithium iron phosphate. In addition, in 2022, the capacity of Guizhou Chanhen Chemical Corporation(002895) , Xinyangfeng Agricultural Technology Co.Ltd(000902) iron phosphate will also be put into operation. After iron phosphate and other new energy projects are put into operation, benefiting from the strong demand of the downstream lithium battery industry and the advantages of the complete integrated industrial chain of phosphorus fertilizer and phosphorus chemical enterprises, Chinese listed companies will also achieve considerable performance increment.
Potash fertilizer: Belarus and Russia have suffered sanctions, the global potash fertilizer supply has shrunk, the price has risen sharply, and the performance of enterprises has increased
We take Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) and other four representative listed companies as samples to summarize the Q1 performance of Listed Companies in the potash sector in 2022. In Q1 2022, four sample companies in the potash industry achieved a total revenue of 10.4 billion yuan, a year-on-year increase of 155.2% and a month on month increase of 56.0%; The net profit attributable to the parent company was 4.79 billion yuan, a year-on-year increase of 331.4% and a month on month increase of 200.4%. Among them, Qinghai Salt Lake Industry Co.Ltd(000792) as the largest enterprise in the sector, the Q1 operating revenue and net profit attributable to the parent company in 2022 were the highest, with 7.6 billion yuan and 3.5 billion yuan respectively. In terms of performance growth, Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) benefited from the substantial increase of its potassium chloride production capacity (from 250000 T / A to 1 million T / a) combined with the sharp rise in product prices. The year-on-year growth of operating revenue and net profit attributable to parent company was the highest in the sample, 317% and 1499% respectively.
For Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) and Qingdao East Steel Tower Stock Co.Ltd(002545) , the substantial increase in revenue and net profit attributable to parent company mainly comes from the sharp increase in the price of potassium chloride products. For Qinghai Salt Lake Industry Co.Ltd(000792) and zangge mining, the reason for the sharp increase in revenue and net profit attributable to parent company is not only the rise in the price of potassium chloride products, but also the sharp rise in the price of lithium carbonate.
In terms of the price of potassium chloride, according to Ifind data, the average price of Q1 potassium chloride in the Chinese market increased by 98.9% year-on-year and 15.7% month on month in 2022; The average import price rose 108.8% year-on-year and 14.2% month on month; The average price in Qinghai Salt Lake area increased by 75.8% year-on-year and 14.5% month on month. In terms of lithium carbonate price, according to Ifind data, the price of industrial lithium carbonate in China in Q1 2022 increased by 465% year-on-year and 97.7% month on month.
Since June 2021, European and American countries have successively imposed economic sanctions on Belarus, resulting in restrictions on the export of potash fertilizer from Belarus. After the geopolitical conflict between Russia and Ukraine intensified in early 2022, Russia was also subject to economic sanctions from European and American countries, and was kicked out of the swift system, which also significantly restricted Russia’s potash export. As Belarus and Russia have been successively sanctioned by European and American countries, nearly 40% of the world’s potassium salt production has been affected, which has led to the overall tightening of potassium fertilizer supply. Under the dual effect of demand and supply, the price of potassium fertilizer products has risen sharply. In addition, on April 27, Putin also said that he would extend Russia’s fertilizer export restrictions until August 31 and consider the possibility of further extension. Therefore, in the short term, the global potash supply will shrink significantly, and the subsequent potash price is expected to rise further, which will bring greater benefits to potash related enterprises.
In terms of lithium salt price, although the recent lithium carbonate price has been corrected from the previous high, due to the strong demand of the downstream new energy industry, the tight situation of short supply in the lithium carbonate industry will still be maintained, and the subsequent lithium carbonate price is expected to remain at a historically high level. At the same time, Qinghai Salt Lake Industry Co.Ltd(000792) and zangge mining’s lithium carbonate production mode is mainly lithium extraction from Salt Lake, which has lower production cost and will have higher profitability compared with other forms of production mode.
Investment advice
Under the global covid-19 epidemic and the geopolitical conflict between Russia and Ukraine, the global food price is rising, and the demand for chemical fertilizer is expected to increase under the background of the improvement of farmers’ planting willingness. At the same time, due to the impact of the situation in Russia and Ukraine, the global supply of chemical fertilizer has shrunk significantly, resulting in a further rise in the price of chemical fertilizer. Under the background of the integration of phosphate fertilizer industry and potash fertilizer industry, the company will be listed on a large scale with its own advantages. For phosphate fertilizer and phosphate chemical industry, we suggest to pay attention to Guizhou Chanhen Chemical Corporation(002895) , Yunnan Yuntianhua Co.Ltd(600096) , Hubei Xingfa Chemicals Group Co.Ltd(600141) , 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) ., Kunming Chuan Jin Nuo Chemical Co.Ltd(300505) . For potash fertilizer sector, we suggest to pay attention to Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qingdao East Steel Tower Stock Co.Ltd(002545) , zangge mining.
Risk tips
The product price fluctuates, the export volume is less than expected, the downstream demand is less than expected, the risk of aggravating geopolitical conflict, the risk of capacity construction, the risk of overseas epidemic and the risk of exchange rate fluctuation.
