Investment summary:
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Phosphate rock is the upstream core raw material of the phosphorus chemical industry chain, and the new supply is limited:
The state has limited the development of new phosphate rock. In 2016, 24 kinds of minerals such as phosphate rock were listed in the strategic mineral catalogue. In 2019, the Ministry of ecological environment will focus on the pollution discharge treatment of phosphate rock, phosphorus chemical industry and phosphogypsum reservoir.
The reserve production ratio of phosphate rock in China is at a low level in the world. Global phosphate rock reserves are 71 billion tons, and China's phosphate rock reserves are 3.2 billion tons, accounting for 4.5%. In 2020, China's phosphate rock output was 88.933 million tons, accounting for about 40%.
At present, China's phosphate rock development cycle is long, and mine exploration is required in the early stage. It takes about 2-4 years to obtain the mining right to fully form the production capacity, and the annual investment amount is also limited. The main downstream of phosphate rock is phosphorus compound fertilizer, and the demand for chemical fertilizer is expected to maintain a stable growth:
72% of the global phosphate rock is used for phosphate fertilizer production, 10% for yellow phosphorus and 7% for phosphate. Corn, vegetables, wheat and rice are the main crops applying phosphorus fertilizer in China, accounting for 22%, 16%, 15% and 14% respectively. According to USDA's prediction, the global sown area of soybean, corn and wheat will increase by 4.0%, 1.6% and 2.6% respectively from 2020 to 2021, and 3.8%, 1.0% and 1.0% respectively from 2021 to 2022.
Since 2020, the price of staple food products has continued to rise, which may continue to boost farmers' planting enthusiasm and stimulate the demand for chemical fertilizer. With the increase of main grain planting area and strong grain prices, the demand for chemical fertilizer is expected to maintain a stable growth.
Iron phosphate will bring continuous improvement in the supply and demand of upstream phosphate rock resources:
The industrial production method of ferric phosphate is mainly precipitation method, in which phosphoric acid / phosphate provides phosphorus source and ferrous sulfate provides iron source. Driven by the rapid growth of lithium iron phosphate battery shipments, the demand expansion of lithium iron phosphate significantly drives the demand for iron phosphate. The mainstream process for the production of lithium iron phosphate in China is iron phosphate method, and about 0.96 tons of iron phosphate is consumed for a single ton of lithium iron phosphate.
At present, the supply of iron phosphate is still tight, but the production capacity of iron phosphate in China will increase rapidly in the future. If the production capacity is implemented as planned, the supply and demand of phosphate rock will continue to improve. As phosphate rock is a non renewable resource, we suggest that the relevant leading enterprises Yunnan Yuntianhua Co.Ltd(600096) , Hubei Xingfa Chemicals Group Co.Ltd(600141) focusing on the complete integration of industrial chain and resource and technological endowment have stronger sustainability.
Market review:
Sector performance: this week, CITIC's primary petroleum and petrochemical index rose or fell - 1.26%, ranking 14th among 30 industry indexes. This week, the Shanghai index rose or fell - 1.63%, and the CITIC primary petroleum and petrochemical index was 0.37% relative to the Shanghai index. Rise and fall of petroleum and petrochemical sub sectors: oil exploitation (- 0.60%), other petrochemical (- 0.63%), oil refining (- 2.07%), engineering services (- 2.14%), oilfield services (- 4.37%), oil sales and storage (- 7.97%).
Rise and fall of individual stocks: this week, the petroleum and petrochemical sector led the rise of individual stocks, including Yantai Tayho Advanced Materials Co.Ltd(002254) (+ 5.68%), Daqing Huake Company Limited(000985) (+ 5.57%), Shandong Polymer Biochemicals Co.Ltd(002476) (+ 5.52%), Rongsheng Petro Chemical Co.Ltd(002493) (+ 3.94%), Hunan Yussen Energy Technology Co.Ltd(002986) (+ 3.69%); Leading decliners include Yueyang Xingchang Petro-Chemical Co.Ltd(000819) (- 20.74%), Sinopec Shandong Taishan Pectroleum Co.Ltd(000554) (- 9.88%), Hunan Heshun Petroleum Co.Ltd(603353) (- 9.12%), Zhongman Petroleum And Natural Gas Group Corp.Ltd(603619) (- 8.90%), Hy Energy Group Co.Ltd(600387) (- 8.45%), etc.
Risk tip: policy risk; Geopolitics exacerbates risks; Risk of sharp fluctuations in crude oil prices and continuous deterioration of global covid-19 epidemic;
