Guosen: Tight supply of potassium fertilizer, increasing demand for energy storage phosphorus, growth in glyphosate exports.

Guosen released research report stating that the global potassium fertilizer industry is an oligopoly with scarce resources, and the medium to long-term supply and demand pattern continues to improve, while potassium fertilizer demand is expected to benefit from the growth in biofuel demand due to high oil prices, and product prices are expected to moderately increase. Phosphorus chemical industry starts with phosphorite, with downstream mainly in agricultural chemical products. It has essential demand attribute and the bank sees a long-term high price level for phosphorite. Optimistic about China's systemic competitive advantage in the pesticide industry. Guosen's main points are as follows: Potassium fertilizer demand is expected to grow due to the background of high oil prices China is the largest potassium fertilizer demand country in the world, while potassium fertilizer resources supply is insufficient, with an import dependency rate of nearly 70%. In 2025, China's production of potassium chloride was 5.82 million tons, a decrease of 6% compared to the previous year, while imports remained basically the same at 12.614 million tons. In April 2026, the potassium chloride market trend maintained a relatively strong posture, with overall supply showing a slightly tight situation. By the end of April, the average price of potassium chloride in Baichuan Yingfu market was 3272 yuan/ton, a slight decrease compared to the previous month, but a year-on-year increase of 10.69%. In terms of supply, mainstream production enterprises in Qinghai maintained high-load production, with a total bonded storage in Hong Kong reaching about 1.97 million tons as of April 24th, an increase of about 5.26% compared to the previous year. Although the total import volume of potassium chloride in the first quarter was about 4.585 million tons, the highest import volume ever recorded, rapid market consumption in the previous period did not lead to effective accumulation of bonded storage, with limited supplement of potassium chloride import sources this month, leading to continuous decline in bonded storage. In the international market, this month in most regions including the United States, the price of potassium chloride continued to rise, as the market reacted to limited imports and concerns about summer replenishment. This uptrend is also supported by the increase in freight rates and the overall tight supply in the second quarter. Canadian potassium fertilizer company (Canpotex) announced that its sales for the second quarter have all been locked in, and there will be no additional spot supply until the end of June, which directly raised market bullish sentiment. The demand for energy storage continues to be positive, optimistic about the long-term high price level of phosphorite According to the statistics of GGII, a research institute specialized in energy storage, the lithium battery shipments for energy storage in China reached 215 GWh in the first quarter of 2026, a year-on-year increase of 139%. Leading companies have generally arranged orders until the end of 2026 or Q2 2027, with saturated production capacity and prioritized acceptance of high-profit orders. The rapid growth of energy storage installation is bringing a substantial demand for lithium iron phosphate, with China's production of lithium iron phosphate reaching 460,000 tons in March 2026, an increase of 180,000 tons year-on-year, and an increase of 70,000 tons month-on-month. Assuming global energy storage battery shipments increase to 600/800/983 GWh in 2025-2027, corresponding phosphorite demand will rise to 600/800/983 million tons, with the proportion of phosphorite consumption in China's production forecast reaching 4.7%/5.9%/7.0%, the consumption share of phosphorus resources in the new energy battery sector will continue to rise. On the supply side of phosphorite, the extractable phosphorite in China has declining grade, increasing difficulties and costs in mining, and a longer time period for new capacity to be put into operation. The scarcity of phosphorite resources is becoming increasingly prominent, and the market price of 30% grade phosphorite has been at a high price range of 900 yuan/ton for over three years. According to Baichuan Yingfu, as of May 6, 2026, the ex-factory price of 30% grade phosphorite in Hubei market was 1080 yuan/ton, unchanged from the previous month, and the delivered price in Yunnan market was 970 yuan/ton, also unchanged from the previous month, optimistic about the long-term high price level of phosphorite. Glyphosate prices are rising rapidly, optimistic about the increase in export demand Since March, affected by the US-Iran conflict, raw material prices have risen sharply, leading to an increase in glyphosate production costs. As of May 12, 2026, the price of glyphosate in East China was 33,000 yuan/ton. In addition, in February, the United States announced that elemental phosphorus and glyphosate, among other key herbicides, were included in the list of critical strategic materials, leading to an expected increase in purchases and effectively supporting the rise in glyphosate prices. China's glyphosate is mainly used for exports, with a cumulative export quantity of 628,200 tons of other non-halogenated organic phosphorus derivatives in 2025, an increase of 4.36% compared to the previous year, significantly improving from the industry's low point in 2023. From January to March 2026, the cumulative export quantity of other non-halogenated organic phosphorus derivatives in China was 197,100 tons, a year-on-year increase of 27.10%, with exports to North America increasing by 3.56%, exports to Latin America increasing by 36.19%, and exports to Asia increasing by 36.35%. The end of each year and January of the following year are the peak seasons for China's herbicide exports to North America, while June to August are the peak seasons for herbicide exports to South America. Considering the inclusion of elemental phosphorus and glyphosate in the list of critical strategic materials by the United States, uncertainties still exist regarding litigation issues facing overseas companies such as Monsanto, and the cost-effectiveness advantage of Chinese glyphosate, the bank is optimistic that the export quantity of Chinese glyphosate/glyphosate ammonium will continue to increase in 2026 and will effectively drive prices throughout the year. Investment recommendations 1) Potassium Fertilizer: There is a supply-demand gap in domestic potassium fertilizer, with a high dependence on imports. It focuses on recommending [Asia-Potash International Investment], which owns mining rights for potassium salt in Laos's Gamong Province covering 263.3 square kilometers, with a reserve of about 1 billion tons of pure potassium chloride, and will soon see a comprehensive increase in potassium chloride production capacity, providing vast long-term growth potential. 2) Phosphorus Chemical Industry: In recent years, with the continuous expansion of new applications in areas such as phosphorus-containing new energy materials, and Chinese phosphorite facing the problem of declining grade due to years of disorderly mining, it is difficult to increase new capacity and import phosphorite in the short term, and the scarcity of phosphorite resources is becoming increasingly prominent; the bank recommends focusing on phosphorite production expansion planning companies with clear directions, such as [Guizhou Chanhen Chemical Corporation] for their rich phosphorite reserves and the leading enterprise in the entire chain of phosphorus chemical industry [Yunnan Yuntianhua], [Hubei Xingfa Chemicals Group], and suggests paying attention to [Hubei Yihua Chemical Industry] and [Chengdu Wintrue Holding] as phosphorite capacity continues to increase. 3) Pesticides: As the world enters a new round of inventory cycle, the bank is optimistic about China's systemic competitive advantage in the pesticide industry, with potential for industry's global active ingredient production proportion to further increase. After industry's capital expenditure slows down and anti-overworking initiative progresses, pesticide prices are expected to bottom out and rebound. It particularly recommends comprehensive pesticide suppliers [Jiangsu Yangnong Chemical], China's largest producer of glyphosate [Hubei Xingfa Chemicals Group], and suggests paying attention to the leading companies in the domestic plant growth regulator industry [Sichuan Guoguang Agrochemical]. At the same time, with the cancellation of export tax rebates for herbicides like glyphosate ammonium, the production costs of pesticide companies have increased, and backward capacity will accelerate clearance. The bank is optimistic about the further increase in future prices of glyphosate ammonium and suggests paying attention to listed companies with glyphosate ammonium capacity such as [Lier Chemical] and [Limin Group]. Risk Warning: Risks of safety production and environmental protection; risks of lower-than-expected demand for agricultural chemical products; market risks caused by capacity expansion; risks of fluctuations in raw material prices; international trade risks, etc.