The Contradiction Between Supply and Demand of New Energy Phosphorus-Holding Chemical Industry Entering the Upper Reaches of C-position is Difficult to Solve

The Contradiction Between Supply and Demand of New Energy Phosphorus-Holding Chemical Industry Entering the Upper Reaches of C-position is Difficult to Solve

With the support of new energy properties, the traditional phosphorus chemical industry is attracting increasing attention from the capital market. Wind statistics show that since the third quarter of this year, the purchase turnover of phosphorus chemical sector reached 159.7 billion yuan, up nearly 19 times year-on-year, and the total market value of constituent stocks reached 278.4 billion yuan, up 122% in a single quarter.

The driving force behind bringing phosphorus to site C is “lithium iron phosphate”. Since this year, with the withdrawal of the national high subsidies for new energy vehicles, as well as the technological breakthrough of the energy density of lithium iron phosphate batteries, lithium iron phosphate has the advantage of low cost began to stage a comeback, the number of installed quickly picked up.

Reporters found that, including Tesla, BYD (002594.SZ), Xiaopeng, the Great Wall and other car companies have increased the proportion of lithium iron phosphate battery models. Daimler also recently said that mercedes-benz will switch to lithium iron phosphate batteries for some models, and Tesla has announced that all standard range versions of electric vehicles worldwide will switch to lithium iron phosphate batteries.

Lithium iron phosphate is the end product of the whole phosphorous chemical industry chain, and the raw material at the most upstream of the industrial chain is phosphate ore. In other words, how much lithium iron phosphate can be produced in the industrial chain ultimately depends on the amount of phosphate ore mined.

From the perspective of downstream application, phosphate ore is mainly used to produce phosphate fertilizer (mainly monoammonium phosphate and diammonium phosphate), accounting for more than 70%. As food prices have risen in recent years, so has the desire to grow, demand for phosphate fertilizers and the pesticide glyphosate.

Market demand is growing rapidly, however, phosphorus is an essential element for plant and animal growth, phosphorus fertilizer is the key to food production, and phosphorus resources are not renewable. In recent years, China has designated phosphate as a strategic resource, limiting its exploitation and export; At the same time, under the restriction of energy consumption and environmental protection policies, the amount of phosphate ore mining is decreasing.

By the end of July 2021, China’s phosphate ore inventory level was about 1.86 million tons, down about 42.6% from the same period last year, and down about 80% from 2016, indicating a significant shortage of supply. China is already struggling to produce enough phosphate ore just to meet its agricultural needs.

From a global perspective, the United States has been forced to stop the export of phosphate ore since 2002, and the European Union has also issued relevant legal documents to restrict the disorderly exploitation of phosphate ore in its member states.

In the middle reaches, Baichuan Yingfu analyst Jiang Chen told reporters that industrial grade ammonium phosphate as the preparation of lithium iron acid precursor iron phosphate necessary raw material, its capacity and phosphate fertilizer overlap. Due to the control of ammonium phosphate production capacity policy, when the demand for ammonium is strong, it is the conventional way of phosphate chemical enterprises to supplement ammonium production capacity through ammonium conversion, but in the current high prices of all kinds of agricultural materials, ammonium also has a good profit space, resulting in ammonium production capacity can not be effectively supplemented.

In addition, due to the high purity phosphoric acid wet process has high technical barriers and matching restrictions, industrial grade phosphoric acid, another key intermediate link of lithium iron phosphate, is also more prominent contradiction between supply and demand.

“Mineral mining in the upper reaches and chemical production capacity in the middle reaches are strictly limited. At the same time, they are also facing the squeeze of agricultural demand. Phosphorus chemical production capacity is difficult to meet the market demand of agriculture and new energy. “A domestic phosphorus chemical enterprise related person in charge told financial union reporters.

As a strategic resource, it is impossible to let go of restrictions. With the further growth of demand, the contradiction between supply and demand of phosphorus chemical industry chain can only be further intensified. The “seller’s market” for phosphorus chemicals will continue unless new technologies and products emerge that can replace them.

Industries with limited supply and growing demand often contain excellent investment opportunities, which is also the logic behind the recent surge in the phosphorus chemical sector in the secondary market. Some private investors said that the holding of new energy will open up hundreds of billions of market space for the phosphorus chemical industry. Under the widespread contradiction between supply and demand, the value of the core link in the industrial chain will be more prominent.

From the perspective of industrial chain of phosphorous chemical industry, in the short term, enterprises with high-purity phosphoric acid and industrial-grade ammonium phosphate production capacity resources and technical reserves are expected to take the lead in integrating with the new energy industry, and their performance will be the first to release; In the medium and long term, the value of phosphate resources will be greatly enhanced. In addition, due to the relatively simple downstream of lithium iron phosphate, binding downstream battery manufacturers in advance will also bring obvious channel advantages for enterprises.