Recently, the phosphorus chemical industry has experienced a notable recovery, driven by the rise in phosphate resource prices and the gradual rebound of the agrochemical market. Major phosphorus chemical enterprises have successively released their performance forecasts and reports for the first three quarters of 2024, showing strong earnings growth. Companies like Hubei Yihua, Yunnan Yuntianhua, and Xingfa Group have all shown trends of performance recovery, fully reflecting the overall improvement in industry prosperity.
Hubei Yihua expects net profits of 755 to 790 million yuan for the first three quarters of 2024, representing a year-on-year increase of 94.04% to 103.04%, while non-recurring net profits also significantly grew by 69.41% to 80.09%. Yunnan Yuntianhua achieved operating income of 46.724 billion yuan in the first three quarters. Although this was a decrease of 12.34% year-on-year, net profits grew by 19.42% to 4.424 billion yuan. Notably, Yunnan Yuntianhua's third-quarter net profit increased by 54.16% year-on-year. Meanwhile, Xingfa Group's net profit for the first three quarters is estimated at 1.28 to 1.38 billion yuan, with year-on-year growth of 37.07% to 47.78%. The strong performance of these companies is mainly attributed to the scarcity and rising prices of phosphorus resources.
Looking back, the continued rise in phosphate rock prices in 2021 and 2022 led to high prosperity in the phosphorus chemical industry, significantly enhancing the profitability of related companies. However, global market volatility in 2023 caused a decline in the prices of major products, impacting the profits of phosphorus chemical enterprises. For example, Yunnan Yuntianhua experienced a decrease in prices for key products like phosphate ammonium and urea in 2023, causing a decline in performance. However, from 2024 onwards, as phosphate rock prices rose again, the performance of phosphorus chemical companies gradually recovered. Currently, China's phosphate rock prices remain high, with an average price of 1,017.5 yuan/ton for 30% grade phosphate rock in August 2024, a 14.69% increase year-on-year.
As the core resource of the phosphorus chemical industry chain, the value of phosphate rock is becoming increasingly prominent. Phosphate rock is widely used not only in traditional phosphate fertilizer production but also plays an increasingly important role in the new energy industry, particularly in the demand for lithium iron phosphate battery materials, promoting further development and utilization of phosphates. According to China Securities' analysis, profits in the phosphorus chemical industry chain are mainly concentrated in the phosphate segment, with a gross margin of over 50% in the second quarter of 2024, indicating its strong profitability.
China possesses large phosphate reserves globally but faces numerous challenges in mining, including low grades and high difficulty in extraction. Currently, China's phosphate reserve-to-production ratio is only 42, well below the global average, resulting in severe resource wastage. Meanwhile, the government has introduced a series of policies to strictly control phosphate mining and new production capacities to protect this strategic resource. In the coming years, as environmental restrictions on mining progress and the acceleration of phasing out backward capacities, the concentration in the phosphate mining industry will further increase, with large state-owned enterprises like Yunnan Yuntianhua and Xingfa Group continuing to dominate industry development.
Demand for phosphorus chemicals also continues to grow steadily, especially in agriculture where phosphate fertilizers remain the largest downstream demand source for phosphate rock. In recent years, global food security concerns have become increasingly severe, continuously increasing agriculture's demand for phosphate fertilizers. Meanwhile, with the rapid development of the new energy vehicle industry, the demand for lithium iron phosphate batteries has also risen sharply. Numerous lithium iron phosphate and related projects are under construction, and the commissioning of these new projects is expected to further drive phosphate rock demand in the new energy sector.
The phosphorus chemical industry is showing strong recovery momentum in 2024. The scarcity and firm prices of phosphorus resources provide vital support for the industry, combined with the growth demand from the agrochemical market and the new energy industry, the prosperity of the phosphorus chemical industry is expected to remain high in the future.
