Orient: Bullish on the potential for an upturn in the prosperity of phosphate ore due to increased demand for energy storage. Focus on the potential for a recovery in the prosperity of the iron lithium sector.

Orient released a research report stating that in the context of the rapid growth of energy storage demand, there is potential for an upward revision of the prosperity expectations curve in the phosphate industry chain. In the industry chain, the bank is most optimistic about the phosphate ore segment with the strongest supply rigidity, focusing on companies with significant increases in phosphate ore in the coming years or outstanding phosphate ore production capacity. In the lithium iron segment, attention is paid to potential prosperity recovery opportunities due to mismatched demand growth and supply expansion. Orient's main points are as follows: Energy storage growth boosts demand for phosphate ore In the current global energy system undergoing major changes, the further development of the energy storage industry makes phosphate resources an important carrier in energy transformation. From food security to energy security, the value of phosphate ore is also undergoing a new reassessment. The recent high level of attention on the phosphate chemical sector in the market is mainly due to the increased expectations of demand from the energy storage industry for the phosphate chemical industry chain. According to statistics, in the first half of 2025, global energy storage battery shipments exceeded 260 GWh. If this trend is maintained, it is expected to exceed 500 GWh for the whole year, a year-on-year growth of about 60%. About 95% of energy storage batteries are lithium iron phosphate batteries, with an estimated demand of approximately 120,000 tons of lithium iron phosphate for each GWh. In the lithium iron phosphate industry chain, the bank is most optimistic about the upstream phosphate ore segment, which has the strongest supply rigidity. According to the bank's calculation, for every ton of lithium iron phosphate, approximately 3.5 tons of phosphate ore are consumed. The energy storage shipments in 2025 are expected to drive demand for about 4.4 million tons of phosphate ore, accounting for over 4% of the current total phosphate ore production in China, and each 100Wh increase in energy storage shipments is expected to drive almost a 1% increase in phosphate ore demand. Phosphate ore supply side bargaining power enhancement enhances tight balance sustainability The market's concerns about the prosperity of phosphate ore have always been mainly due to the risk that the high prosperity of phosphate ore since 2021 will collapse as a result of the successive release of a large number of new projects in the future. Although the continued strength of phosphate ore prosperity in the past two years and the uncertainty of the progress of large phosphate ore projects have somewhat eased the market's concerns, the judgments of some investors on the future prosperity of phosphate ore are still mainly downward after high volatility. However, the bank believes that it is difficult for the tight balance of phosphate ore supply and demand to see a systemic reversal in the next few years, orderly releases of phosphate ore production capacity domestically and internationally, and the key is the continuous enhancement of the supply side's bargaining power. Under the drive of emerging demand growth, there is potential for an upward revision of the phosphate ore prosperity curve in the future. Phosphate industry chain prosperity expectations curve expected to be revised upward under energy storage growth Based on the bank's scenario calculation of future energy storage shipment growth, even without considering the growth potential of traditional demand such as agriculture for downstream phosphate ore, in the bank's set high-growth scenario for future energy storage, the impact of energy storage on phosphate ore demand will exceed that of the automotive sector, becoming the new core growth momentum in the phosphate industry chain demand. This change will further delay the critical point where some investors worry about excess supply caused by the release of phosphate ore, and even temporarily create a supply-demand imbalance; if energy storage growth exceeds expectations, the expected prosperity curve of phosphate ore in the future may be further revised upward. In addition, under a series of scenarios set by the bank, the operating rates of midstream material segments could also be restored to a certain extent, and the industry's operating rates have indeed increased recently. If the supply expansion in the materials segment proceeds orderly, the prosperity of key materials such as lithium iron phosphate, which is currently in an extremely low state, could also see improvement. Risk warning Demand growth is lower than expected; production capacity releases exceed expectations; uncertainty and risks in the calculations.