Fertilizer industry will come out of the bottom to welcome the spring

Fertilizer industry has experienced the slump of nearly 4 years and finally ushered in the spring. The de-inventories of the fertilizer industry have been effective for the first four years, while the demand in North America and India has recovered. We believe that the prices of nitrogen, phosphorus and potash will all go out of the bottom, and the upward trend will continue until 2015. We think that the order of the industry is potash fertilizer> phosphate fertilizer> nitrogen fertilizer, and the recommended order is salt lake stock, six-country chemical industry, Xingfa group, Yuntianhua, Guannong stock, Hualu Hengsheng. reason:

The high inventory of potash fertilizer will increase gradually. In the past three years, potash fertilizer producers have continued to control the operating rate, and the high inventory of potash fertilizer producers has been initially effective. At the end of June 2014, North American manufacturers’ inventory was the lowest in nearly three years. With the continuous recovery of demand from demand-side India, Brazil, and other regions, potash fertilizer imports in this category exceeded market expectations. At present, the inventory of potash fertilizers in China is also declining. China's potash contract negotiations will be cancelled in the second half of the year, which may further consume domestic inventories, leading to the increase in contract prices next year. The concentrated production of large quantities of potassium sulphate and potassium sulphate will also become a catalyst for the price increase of potassium chloride.

The supply of phosphate fertilizers will continue to increase. Phosphate fertilizer producers in Russia, Tunisia, and the United States shut down some DAP production capacity due to political turmoil and environmental pressures. Since this year, the import demand for phosphate fertilizers in Brazil has greatly increased, driving the price of phosphate fertilizers to bottom out. At the same time, India’s demand has also begun to recover significantly under the support of the appreciation of the rupee and the improvement of government subsidies for fertilizer subsidies, or has become the main driver of phosphate fertilizer price increases in the second half of the year. The 2015 phosphorus fertilizer tariff policy is expected to relax and further raise the domestic phosphate fertilizer utilization rate to support the high price of phosphate fertilizer. The price increase of phosphate fertilizer will eventually be transmitted to the price of phosphate rock.

Nitrogen fertilizer costs support the industry to stabilize at the bottom of the synergy. Nitrogen fertilizer unilaterally fell in urea prices in the past four years due to a serious overcapacity in domestic production and a sharp drop in coal costs. If you consider the full cost of the current urea industry, the loss ratio has reached 63%, if only consider the cash cost loss ratio also reached 46%. We expect the future price of nitrogen fertilizers to rebound from the bottom, mainly due to 1) the stabilization of the cost of coal prices to form a support; 2) the joint price increase at the export end drives the recovery of domestic urea prices; 3) the export of nitrogen fertilizers in 2015 will be liberalized. The operating rate of the industry went up further and supported the price of products.