Guosen: The downward cycle of the pesticide sector has bottomed out, and it is optimistic about the demand driving and the industry anti-intimidation, leading to overall price increases.

Guosen 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 an increase in pesticide demand. The downstream has adopted an on-demand purchase and low inventory strategy, resulting in strong demand for restocking during the peak season this year. On the supply side, the increase in exports of pesticides from India and the United States is limited, while China's pesticide exports have increased significantly. The capital expenditure growth rate of the pesticide industry has been negative for 5 consecutive quarters, indicating that the second round of industry expansion is coming to an end. The bank believes that the downturn cycle of the pesticide industry has bottomed out, and is optimistic about the overall increase in pesticide prices driven by demand and industry anti-insulation actions. The main points of Guosen are as follows: Potash supply and demand are tightly balanced, with international potash prices remaining high. China is the world's largest consumer of potash, while the supply of potash resources is relatively insufficient, with an import dependence of over 60%. In 2024, China's production of potassium chloride will decrease by 2.7% to 5.5 million tons, with imports increasing by 9.1% to 12.633 million tons, reaching a historical high. By the end of September 2025, domestic potassium chloride port inventories were 1.7292 million tons, a decrease of 1.356 million tons from the same period last year, a decrease of 43.95%. It is expected that domestic potash safety stocks will increase to over 4 million tons in the future as food production security becomes increasingly important. The domestic potassium chloride market price saw a slight decrease in September, with the average price at the end of September at 3,237 yuan/ton, a month-on-month decrease of 1.43% and a year-on-year increase of 34.82%. In the international market, the import volume of potassium chloride in Brazil showed a significant growth trend from January to August this year, with cumulative imports reaching 10.1 million metric tons, a historical high, and international potash prices remained stable in September. The prosperity of the phosphate chemical industry depends on the prosperity of phosphate rock prices, and it is optimistic about maintaining a high level of long-term phosphate rock prices. In the past two years, China's exploitable phosphate ore grade has declined, making extraction more difficult and costly. The time period for putting new capacity into operation is long, and demand for downstream new areas represented by lithium iron phosphate continues to grow. The supply and demand situation of domestic phosphate ore is relatively tight, with the scarcity of phosphate resources becoming increasingly prominent. The market price of 30% grade phosphate ore has been in the high price range of 900 yuan/ton for over 2 years. As of September 29, 2025, the ex-factory price of 30% grade phosphate ore in Hubei was 1,040 yuan/ton, and the delivery price of 30% grade phosphate ore in Yunnan was 970 yuan/ton, both unchanged from the end of the previous month. The price difference between domestic and foreign phosphate fertilizers remains at a high level. In 2025, the phosphate fertilizer export policy continues to adhere to the principle of total control, emphasizing "domestic priority, appropriate export, self-regulation export, with external compensation." Export quotas have been slightly reduced compared to last year, but the window period is concentrated from May to September, and the inspection time has been optimized to half a month. Export quotas are issued in two batches, with the first batch focused on the peak period from May to September. On September 30, the price difference between the FOB spot price of phosphoric acid and ammonium in the Baltic region and the market price in Hubei was about 1,370 yuan/ton; the price difference between the FOB price of ammonium phosphate and the market price in Shandong was about 1,409 yuan/ton. 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 lower than expected demand for agricultural chemicals; market risks resulting from capacity expansion; risks of fluctuations in raw material prices; and international trade risks.