The Zhitong Finance App learned that Guohai Securities released a research report saying that on the basis of a sharp price correction in the second quarter, prices in the fertilizer industry have fallen to a low level in the past two years. Currently, industry inventories are at a low level. As prices stabilize and pick up slightly, at the same time, fall fertilizer began one after another in the third quarter.Demand for chemical fertilizer is expected to increase, and the prosperity of the industry is expected to rise, maintaining the “recommended” rating of the fertilizer industry.
Recommended attention: (1) phosphate fertilizer: Yuntianhua (600096.SH), Xinyangfeng (000902.SZ), Hubei Yihua (000422.SZ), Chuanfa Longmei (002312.SZ), Yuntu Holdings (002539.SZ), Xingfa Group (600141.SH), Chuanheng Co., Ltd. (002895.SZ), Six Nations Chemical (0.3), Chuanjinnuo (300505.SZ), etc.; (2) 600470.SHnitrogen fertilizer: Hualu Hengsheng (600426.SH), Yangmei Chemical (600691.SH), Hubei Yihua, etc.; (3)compound fertilizer: Xinyangfeng, Yuntu Holdings, Stanley (002588.SZ), Soulter (002538.SZ), Patan Co., Ltd. (002170.SZ), etc.; (4)potash: Salt Lake Co., Ltd. (000792.SZ), Potassium International (000893.SZ), Zangge Mining (000408.SZ), Oriental Tower (002545.SZ), etc.
The main views of Guohai Securities are as follows:
Inventory is at the bottom, and demand is rising.In the second quarter, due to the decline in prices of major raw materials such as coal, sulfur, and phosphate ore, the prices of nitrogen, phosphorus, and potassium monomers continued to decline, and compound fertilizer prices also declined. Under the influence of the “buy up, not buy down” mentality, industry demand declined, and the operating rate of enterprises remained low, and the market mainly consumed original inventories. As of July 21, 2023, urea plant inventories were 176,200 tons, and market stocks were 84,000 tons; monoammonium phosphate and diammonium phosphate plant inventories were 1340 and 164,300 tons respectively, with market inventories of 0.06 to 7800 tons; compound fertilizer plant inventories were 354,700 tons, and market inventories were 1954,700 tons, and market inventories were 193,600 tons; all at historically low levels. As autumn fertilizer procurement begins one after another, the operating rate of compound fertilizer may increase month-on-month, and demand for single mass fertilizer is expected to increase. Under the current low inventory level, supply and demand in the industry are tight, and the economy is expected to rise.
Costs went up, and prices stopped falling.Affected by high summer temperatures, coal consumption has increased, and demand recovery supports coal prices to a certain extent. High coal prices provide strong cost support for urea prices. The price of ammonia synthesis is expected to rise under high coal prices. As the start of compound fertilizer increases and demand for monoammonium phosphate etc. increases, there is less additional production capacity on the supply side of phosphate ore. Prices are expected to stop falling under tight supply and demand. Supported by costs, the price of ammonium phosphate is expected to rebound. According to Zhuochuang Information, as of July 20, 2023, the operating rate of compound fertilizer was 29.28%, up 9.18 percentage points from the end of June; the operating rate of monoammonium phosphate was 47.97%, up 16.13 percentage points from the end of June. The third quarter enters the fall fertilizer season, and the quantity and price of chemical fertilizer are expected to rise sharply. At the same time, under low-cost raw materials, compound fertilizer profits are expected to recover.
Risk warning:Risk of fluctuations in product and raw material prices; risk of fluctuations in crop prices; risk of environmental protection and production safety; risk of construction progress and efficiency of new projects falling short of expectations; risk of seasonal fluctuations; focus on the risk of company performance falling short of expectations.