Guotai Junan Securities: Potash and glyphosate prices are rising, the pesticide industry downcycle has already bottomed out

According to the Zhitong Finance APP, Guosen Securities released a research report stating that the supply and demand of potash fertilizer is tightly balanced, and international potash prices continue to rise. The prosperity of the phosphate chemical industry depends on the price trend of phosphate rock. The domestic supply and demand pattern for phosphate rock is relatively tight, and the scarcity of phosphate resources is becoming increasingly prominent, with a positive outlook for the long-term price center of phosphate rock to maintain a high level. The firm believes that the pesticide industry has reached the bottom of its downward cycle and is optimistic about the overall increase in pesticide prices driven by demand and the industry's anti-involution actions. The main points of Guosen Securities are as follows: Tight balance of potash supply and demand, international potash prices continue to rise China is the world's largest consumer of potash fertilizer, while the supply of potash resources is relatively insufficient, with an import dependence exceeding 60%. In 2024, China's potash chloride production is expected to be 5.5 million tons, a year-on-year decrease of 2.7%, while imports are expected to reach 12.633 million tons, a year-on-year increase of 9.1%, setting a historical high. As of the end of July 2025, domestic port inventory of potash chloride was 1.82 million tons, a decrease of 950,000 tons compared to the same period last year, a decline of 34.39%. In the future, as food production safety becomes increasingly important, it is expected that domestic safe inventory of potash fertilizer will rise to over 4 million tons. In July, domestic potash was affected by production cuts and maintenance, maintaining low inventory levels, leading to tight overall shipments; imported potash port inventory fell by 20.11% year-on-year, with new ships arriving slowly and border trade spot shortages compounding, continuing to restrict spot circulation. In July, the average price of potash chloride rose from 3,239 yuan/ton to 3,399 yuan/ton, stabilizing at 3,230 yuan/ton by the end of the month. In the international market, in July, North American manufacturers raised the offshore price of granular potash to $410/short ton (FOB), while Brazil's price fell to $360/ton (CFR) in August due to weakened seasonal demand in South America; in Asia, procurement resilience was highlighted as Indonesia and Bangladesh successively initiated bidding. The prosperity of the phosphate chemical industry depends on the price trend of phosphate rock, with a positive outlook for the long-term price center of phosphate rock to maintain a high level In the past two years, the grade of exploitable phosphate rock in China has declined, with increased extraction difficulty and costs, while the time cycle for new production capacity to come online is relatively long. At the same time, demand from new downstream fields represented by lithium iron phosphate continues to grow, leading to a tight supply and demand pattern for domestic phosphate rock, with the scarcity of phosphate resources becoming increasingly prominent. The market price of 30% grade phosphate rock has been operating in the high price range of 900 yuan/ton for over two years. According to Baichuan Yingfu, as of July 31, 2025, the tax-inclusive price of 30% grade phosphate rock in the Hubei market was 1,040 yuan/ton, while the delivery price in the Yunnan market was 970 yuan/ton, both remaining flat compared to the end of last month. The price difference of phosphate fertilizer between domestic and overseas markets is expanding In 2025, the export policy for phosphate fertilizer will continue to follow the principle of total quantity control, emphasizing "domestic priority, appropriate exports, self-discipline in exports, and supplementing the domestic market with foreign supplies." The export quota has been slightly reduced compared to last year, but the window period is concentrated from May to September, with the inspection time optimized to half a month. Export quotas will be issued in two batches, with the first batch concentrated during the peak period from May to September. On July 30, the FOB spot price of monoammonium phosphate in the Baltic Sea had a price difference of about 1,707 yuan/ton compared to the market price in Hubei; the FOB price of China's diammonium phosphate had a price difference of about 1,451 yuan/ton compared to the market price in Shandong. Currently, overseas phosphate fertilizer prices are significantly higher than domestic prices, and companies with phosphate fertilizer export quotas are expected to benefit from the profit increase brought about by the high price difference between domestic and overseas phosphate fertilizers The "Zhengfeng Zhijuan" three-year action for pesticides has begun, and the pesticide sector has reached the bottom of its downward cycle The price index of Zhongnong Lihua's raw materials has been declining for over three years, with a drop of nearly two-thirds from its peak. Currently, pesticide prices and stocks in the pesticide sector are at relatively low levels. On the demand side, the continuous increase in grain planting areas in South America has led to an increase in pesticide demand. In the early stages, downstream companies adopted a just-in-time purchasing and low inventory strategy, resulting in strong replenishment demand during this year's peak season. On the supply side, the increase in pesticide exports from India and the United States is limited, while China's pesticide exports have grown significantly. The capital expenditure in the pesticide industry has seen a year-on-year decline for four consecutive quarters, and the second round of industry expansion is gradually coming to an end. The firm believes that the downward cycle of the pesticide industry has reached its bottom and is optimistic about the overall increase in pesticide prices driven by demand and the background of the industry's anti-involution actions