Soochow: The new energy industry has a strong demand for energy storage. It is optimistic about the development prospects of the phosphorus chemical industry chain.

Soochow released a research report stating that it is expected that the demand for new phosphorite from 2025 to 2026 will be 4.82 to 6.12 million tons, with the strategic reserves sector being the main force. There is a significant gap between planned and actual phosphorite production capacity, mainly because the capacity needs time to ramp up, and supply is greatly affected by environmental and safety incidents. It is optimistic about integrated enterprises with both phosphorite resources and ferrous phosphate production capacity. Soochow's main points are as follows: Demand side Phosphorite: In 2024, China's demand for phosphorite was 113.2 million tons. The bank expects the demand for phosphorite in 2025 and 2026 to be 118.02 and 124.14 million tons, with an actual increase in demand of 4.82 and 6.12 million tons. The demand is growing in emerging areas while decreasing in traditional areas. 1) Emerging demand: Driven by the power and energy storage battery industry, the bank predicts that the demand for phosphorite in the power and strategic reserves sectors in 2025 and 2026 will increase by 3.93 and 4.31 million tons, with the demand for ferrous phosphate accounting for 3.64 and 4.07 million tons, and the demand for lithium hexafluorophosphate accounting for 0.29 and 0.24 million tons, providing strong support for the demand for phosphorite. 2) Traditional demand: Due to the rising prices of upstream raw materials, profits of Chinese phosphate fertilizer producers are weakening, and China's phosphate fertilizer production decreased year-on-year from January to September 2025. The bank believes that the possibility of a rebound in demand for phosphate fertilizers in 2025 and 2026 is weak, while the demand for phosphates and phosphides is likely to remain stable. Ferrous phosphate: In 2024, China's demand for ferrous phosphate was 2.14 million tons. The bank expects the demand for ferrous phosphate in 2025 and 2026 to be 3.25 and 4.49 million tons, with an increase in demand of 1.11 and 1.24 million tons from the power and strategic reserves sectors, significantly boosting demand for ferrous phosphate. Supply side Phosphorite: In 2024, China's phosphorite production capacity, effective production capacity, and output were 19.447, 11.916, and 11.353 million tons respectively. The bank predicts that in 2025 and 2026, phosphorite production capacity will be 21.732 and 24.762 million tons, with effective production capacities of 13.31 and 15.158 million tons, and outputs of 12.307 and 13.28 million tons, resulting in actual increases in production of 0.954 and 0.973 million tons. China's phosphorite supply is mainly affected by environmental and safety incidents to a large extent, and production capacity needs time to ramp up, leading to a significant gap between planned and actual phosphorite production capacity. Ferrous phosphate: The industry has been suffering from long-term oversupply, with lithium ferrous phosphate manufacturers being the main players. In 2024, China's effective production capacity and output of ferrous phosphate were 4.26 and 2.05 million tons respectively. The bank predicts that in 2025 and 2026, the effective production capacity of ferrous phosphate will be 4.99 and 5.4 million tons, with outputs of 2.99 and 4.32 million tons, resulting in actual increases in production of 0.94 and 1.33 million tons. Price outlook Phosphorite: In 2024, China's phosphorite production capacity utilization rate was 58%, with the effective capacity utilization rate at 95%. The bank predicts that in 2025 and 2026, there will be an overall balance between supply and demand for phosphorite, with capacity utilization rates of 57% and 54%, and effective capacity utilization rates of 92% and 88%, remaining at relatively high levels. Prices of low-grade phosphorite may come under slight pressure, while prices of high-grade phosphorite will remain high. Ferrous phosphate: The bank predicts a tight supply and demand situation for ferrous phosphate, with the effective production capacity utilization rate in the industry starting to rebound in the third quarter of 2025, assuming that the effective production capacity utilization rates of ferrous phosphate in 2025 and 2026 will be 60% and 80%. China still faces a supply-demand gap for ferrous phosphate (in 2024, the effective production capacity utilization rate of ferrous phosphate in China was only 48%). As downstream lithium ferrous phosphate companies' profitability improves, the outlook for ferrous phosphate is expected to improve. Investment recommendation: The bank recommends companies with a focus on market value elasticity and performance elasticity of ferrous phosphate, as well as the situation of phosphorite resources. It suggests the following targets and rankings: 1) Power equipment: The bank is positive about companies with layouts in both ferrous phosphate and phosphorite, and recommends Guangzhou Tinci Materials Technology, Hunan Yuneng New Energy Battery Material, and CNGR Advanced Material. 2) Basic chemical industry: The bank estimates that the proportion of phosphorite in the total cost of ferrous phosphate is about 45%. In the event of rising prices of ferrous phosphate, companies with ferrous phosphate production capacity and abundant phosphorite resources, or those with significant advantages in phosphorite production capacity investment, are likely to have a higher net profit. It suggests paying attention to Guizhou Chanhen Chemical Corporation, Hubei Xingfa Chemicals Group, Shenzhen Batian Ecotypic Engineering, Chengdu Wintrue Holding, Sichuan Development Lomon, Hubei Yihua Chemical Industry, YONFER Agricultural Technology, LB Group Co., Ltd., Stanley Agriculture Group, Yunnan Yuntianhua, Kunming Chuan Jin Nuo Chemical, and Kingenta Ecological Engineering Group. Risk warning: Significant price fluctuations of products; downstream demand growth falling short of expectations; substantial release of phosphorite and ferrous phosphate production capacity; production risks relating to safety and environmental protection.