Zhongtong Finance and Economics App learned that Shouchuang Securities released research reports stating that in the third quarter, influenced by the weather, the demand for autumn fertilization has been delayed, coupled with a relatively loose supply side, urea prices are showing a downward trend, and the price spread is narrowing. According to Baichuan Yingfu data, by the end of September, the gross profit of urea was less than 100 yuan/ton. In the fourth quarter, there will be demand for winter reserve fertilizers, coupled with some units undergoing maintenance, urea prices are stabilizing, with limited downside potential. Recently, potassium chloride prices have seen a slight rebound. As of October 17, 2024, domestic potassium chloride is priced at 2442 yuan/ton, an increase of 41 yuan/ton from the end of September. In addition, the escalation of the situation in the Middle East has also brought hidden concerns to potassium fertilizer trade, and overseas potassium chloride prices have rebounded since October.

Shouchuang Securities' main points are as follows:

Nitrogen fertilizer: Prices experienced a decline in the third quarter, with recent prices rebounding.

In the third quarter, influenced by the weather, the demand for autumn fertilization has been delayed, coupled with a relatively loose supply side, urea prices are showing a downward trend, and the price spread is narrowing. According to Baichuan Yingfu data, by the end of September, the gross profit of urea was less than 100 yuan/ton. In the fourth quarter, there will be demand for winter reserve fertilizers, coupled with some units undergoing maintenance, urea prices are stabilizing, with limited downside potential.

Overseas, since October, urea prices have risen, with the latest FOB price in the Baltic Sea at 332.5 US dollars/ton, an increase of 20 US dollars/ton from the end of September, and the tension in the Middle East also poses risks to urea trade.

Domestically, under the favorable macro policy environment, urea prices have also recovered since October, once reaching 1900 yuan/ton before falling back. Overall, urea prices both domestically and internationally show signs of a certain rebound. Currently, profit levels are at a low point, and the approaching winter reserve fertilizers are expected to alleviate supply-demand contradictions. Recommended investment targets include Shandong Hualu-Hengsheng Chemical (600426.SH) and Hubei Yihua Chemical Industry (000422.SZ).

Phosphate Fertilizer: Phosphate ore continues its high prosperity, and the price of ammonium phosphate is expected to remain high.

Overall, currently the price of ammonium phosphate remains at a relatively high level. Firstly, the price of phosphate ore is at a high level on the raw material side, providing some support on the cost side. In addition, the limited new production capacity of ammonium phosphate and a good supply pattern. The "Energy Saving and Carbon Reduction Action Plan for 2024-2025" issued by the State Council in June emphasized monitoring the new production capacity of yellow phosphorus and ammonium phosphate, showing strong constraints on the supply side. The industry inventory of monoammonium phosphate and diammonium phosphate is at a medium-low level. As the winter storage season approaches, downstream demand for replenishment still exists, and the price of ammonium phosphate is expected to maintain its current level. Recommended target selection focuses on Yunnan Yuntianhua (600096.SH), Xinyangfeng Agricultural Technology (000902.SZ), Guizhou Chanhen Chemical Corporation (002895.SZ), and Hubei Xingfa Chemicals Group (600141.SH).

Potassium Fertilizer: The supply of potassium fertilizer is relatively abundant, and the escalation of the situation in the Middle East brings hidden concerns to potassium fertilizer trade.

So far this year, although the domestic production of potassium chloride has decreased, the import volume of potassium chloride continues to grow year-on-year. Market inventory remains at a relatively high level, presenting an overall loose situation for potassium chloride. Coupled with the delay in autumn fertilizer application, the third quarter witnessed a downward trend in potassium chloride prices. Recently, there has been a slight rebound in potassium chloride prices. As of October 17, 2024, the domestic potassium chloride price was 2,442 yuan/ton, an increase of 41 yuan/ton from the end of September. The escalation of the situation in the Middle East has also brought hidden concerns to potassium fertilizer trade, and overseas potassium chloride prices have rebounded since October.

Shouchuang Securities believes that potassium fertilizer is a typical oligopoly industry, with 67% of the world's potash resources concentrated in three countries: Canada, Belarus, and Russia, with extremely uneven distribution. Geopolitical conflicts will inevitably bring trade risks, increase shipping costs, and to some extent support potassium fertilizer prices with limited downside potential. Recommended target selection focuses on Asia-Potash International Investment (000893.SZ).

Risk warning

Nitrogen Fertilizer: A large amount of new production capacity has been put into operation, exacerbating supply and demand contradictions; Phosphate Fertilizer: The price of phosphate rock is falling, leading to a decline in prices on the cost side; Potassium Fertilizer: Prices continue to decline, and the enthusiasm of dealers for purchases is weakening.