Guosen Securities: The pesticide sector's downward cycle has bottomed out, optimistic about demand-driven growth and overall price increases due to industry de-involution

According to the Zhitong Finance APP, Guosen Securities released a research report stating that current pesticide prices and pesticide sector stocks are at relatively low levels. The continuous increase in grain planting area in South America has led to increased pesticide demand, while downstream sectors have 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 significantly increased. The capital expenditure growth rate in the pesticide industry has turned negative for five consecutive quarters, and the second round of industry expansion is gradually coming to an end. The firm believes that the pesticide industry's downward cycle has bottomed out and is optimistic about the overall rise in pesticide prices driven by demand and actions against industry involution.

Guosen Securities' main viewpoints are as follows:

Potash supply and demand are tightly balanced, and international potash prices remain high

China is the world's largest potash consumer, 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 decrease of 2.7% year-on-year, while imports are projected to reach 12.633 million tons, an increase of 9.1% year-on-year, setting a historical high. As of September 30, 2025, domestic port inventory of potash chloride was 1.7292 million tons, a decrease of 1.356 million tons compared to the same period last year, a decline of 43.95%. In the future, as food production safety becomes increasingly prioritized, it is expected that domestic safe inventory of potash will rise to over 4 million tons. In September, domestic potash chloride market prices slightly declined, with the average market price of potash chloride by Baichuan Yingfu at RMB 3,237 per ton at the end of September, a month-on-month decrease of 1.43%, and a year-on-year increase of 34.82%. In the international market, Brazil's potash chloride imports showed significant growth from January to August this year, with cumulative imports reaching 10.1 million metric tons, setting a historical high, while international potash prices remained stable in September.

The prosperity of the phosphate chemical industry depends on the price trend of phosphate rock, and long-term price stability of phosphate rock is expected to remain at a high level

In the past two years, the grade of exploitable phosphate rock in China has declined, with increased mining 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-demand pattern for domestic phosphate rock. The scarcity of phosphate resources is becoming increasingly prominent, with the market price of 30% grade phosphate rock operating in the high price range of RMB 900 per ton for over two years. According to Baichuan Yingfu, as of September 29, 2025, the tax-inclusive price of 30% grade phosphate rock in the Hubei market was RMB 1,040 per ton, while the delivery price in the Yunnan market was RMB 970 per ton, both remaining stable compared to the end of last month.

The price difference between domestic and international phosphate fertilizers remains at a high level

In 2025, the export policy for phosphate fertilizers will continue to adhere to the principle of total quantity control, emphasizing "domestic priority, appropriate exports, self-discipline in exports, and external compensation for internal needs." The export quota has been 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 are issued in two batches, with the first batch concentrated during the peak period from May to September. On September 30, the FOB spot price of monoammonium phosphate in the Baltic Sea had a price difference of approximately RMB 1,370 per ton compared to the market price in Hubei; the FOB price of diammonium phosphate in China had a price difference of approximately RMB 1,409 per ton compared to the market price in Shandong. Currently, overseas phosphate fertilizer prices are still significantly higher than domestic prices, and companies with phosphate fertilizer export quotas have recently benefited from the profit increase brought by the high price difference between domestic and overseas phosphate fertilizers Risk Warning: Risks related to safety production and environmental protection; risks of agricultural chemical product demand falling short of expectations; market risks due to capacity expansion; risks of raw material price fluctuations; risks related to international trade, etc