Orient: Expectations for increased demand for energy storage are bullish, with potential for an upturn in the phosphorus ore market. Focus on the iron-lithium sector for potential opportunities for economic recovery.

Orient released a research report stating that with the rapid growth of energy storage demand, there is potential for an upward revision in the outlook of the phosphorus industry chain. In the industry chain, the bank is most bullish on the phosphorus ore segment with the strongest supply rigidity, focusing on companies with significant increases in phosphorus ore production or outstanding phosphorus ore production capacity in the next few years. In the lithium iron segment, attention is focused on the potential for a recovery in prosperity due to the mismatch between demand growth and supply expansion. Orient's main points are as follows: Energy storage growth boosts demand for phosphorus ore At a time of major changes in the global energy system, the development of the energy storage industry further makes phosphorus resources an important carrier in energy transformation. From food security to energy security, the value of phosphorus ore is being reevaluated. Recently, there has been high market attention on the phosphorus chemical sector, mainly due to the expected increase in demand for the phosphorus chemical industry chain driven by the energy storage industry. According to statistics, in the first half of 2025, global energy storage battery shipments exceeded 260GWh, with the potential to exceed 500GWh for the whole year if this trend is maintained, representing a year-on-year growth of about 60%. About 95% of energy storage batteries are lithium iron phosphate batteries, and based on a unit of GWh corresponding to 0.25 million tons of lithium iron phosphate, the energy storage battery shipments in 2025 are expected to drive demand for approximately 1.2 million tons of lithium iron phosphate. In the lithium iron phosphate industry chain, the bank is most bullish on the upstream phosphorus ore segment with the most rigid supply. According to the bank's calculations, each ton of lithium iron phosphate corresponds to about 3.5 tons of phosphorus ore consumption, and the energy storage battery shipments in 2025 are expected to drive demand for approximately 4.4 million tons of phosphorus ore, accounting for over 4% of China's total phosphorus ore production, with each additional 100Wh of energy storage shipments leading to a nearly 1% increase in phosphorus ore demand. Enhanced pricing power on the supply side of phosphorus ore strengthens the sustainability of tight balance The market has long been concerned about the sustainability of the phosphorus ore market due to the risk of a collapse in phosphorus ore prices at high levels after the prosperity of phosphorus ore from 2021 to peak. Although the resilience of the phosphorus ore market over the past two years and the uncertainty of large phosphorus ore projects have somewhat eased market concerns, some investors still anticipate a downward trend in the future prosperity of phosphorus ore after a high level of volatility. However, the bank believes that the tight supply and demand pattern of phosphorus ore in the next few years is unlikely to see a systematic reversal, with orderly release of phosphorus ore production capacity both domestically and abroad, and the key is the continuous strengthening of pricing power on the supply side. With the pull of emerging demand growth, there is potential for an upward revision in the phosphorus ore market outlook. Phosphorus industry chain prosperity expectations under energy storage growth likely to be revised upwards Based on the bank's scenario calculations for future energy storage shipment growth rates, even without considering the growth potential of traditional downstream demand such as agriculture in phosphorus ore, in the bank's set future high-growth scenario for energy storage, the effect of energy storage on phosphorus ore demand will exceed that of the automotive sector, becoming the new core growth driver in the phosphorus industry chain. This change will further delay the critical point at which some investors are concerned about an excess of phosphorus ore supply due to the release of supply, and may even temporarily lead to a tight supply and demand situation; if energy storage growth exceeds expectations, the future outlook for the phosphorus ore market may be further revised upwards. In addition, in the bank's set scenarios, the operating rate of the middle material segment can also be restored to a certain extent, with recent industry operating rates indeed showing some improvement. If future material segment supply expansion is orderly, the prosperity of main materials such as lithium iron phosphate, which are currently in an extremely low state, may also see improvements. Risk warning Demand growth falls short of expectations; production capacity is released beyond expectations; uncertainty and risk in calculations.