Open source securities: strategic resources + new energy dual-drive phosphorus chemical industry ushering in demand structure reshaping

Open Source Securities released a research report, stating that the supply-demand gap for domestic phosphorus ore in 2026-2028 (total supply - total demand) is estimated to be 32, 131, and 975 million tons respectively. It is expected that the domestic supply-demand for phosphorus ore will remain tight in 2026-2027, and the supply-demand will tend to be loose in 2028. The downstream traditional phosphorous chemical products such as yellow phosphorus, ammonium phosphate, and phosphate salts continue to optimize, coupled with the high demand and profit recovery in the iron phosphate (lithium) industry chain market. Under the dual driving force of strategic resources and new energy, the company is optimistic about the reshaping of the phosphorous chemical demand structure, the accelerated transformation of old and new energies, and the integration of "mining, selecting, and adding" leading enterprise resources with significant technological advantages, on the basis of stable operating performance and sufficient operating cash flow, the cash dividend momentum is further enhanced. The main points of Open Source Securities are as follows: Phosphorous Chemicals: Driven by strategic resources and new energy, the transformation of old and new energies in phosphorous chemicals is expected to accelerate From the perspective of the industry chain, since 2025, the prices of upstream phosphorus ore have been running high, with differentiation between high and low grades, and the price of sulfur (sulfuric acid) has increased significantly, supported by strong cost sides. The operation of downstream phosphorous chemical products is differentiated, with limited growth in traditional products such as yellow phosphorus, ammonium phosphate, phosphorus calcium, and sodium phosphate salts. The development of the "phosphorus ore-phosphoric acid-iron phosphate (lithium)" industry chain is positive, and the upgrading of phosphorus resources driven by strategic legislation in the United States. The company believes that the Chinese phosphorous chemical industry is in a key period of transition from old to new energies. The integration of "mining, selecting, and adding" leading enterprise resources with significant technological advantages is moving towards a new stage of revaluation of resource value and extension of the high-end of the industry chain. [Recommended targets] Hubei Xingfa Chemicals Group, Chengdu Wintrue Holding, etc. [Benefiting targets] Yunnan Yuntianhua, Guizhou Chanhen Chemical Corporation, Shenzhen Batian Ecotypic Engineering, YONFER Agricultural Technology, Stanley Agriculture Group, Hubei Yihua Chemical Industry, Sichuan Development Lomon, etc. Cost-Side: It is expected that the supply-demand of phosphorus ore will be tight in 2026-2027, with differentiation between high and low-grade prices Reserves: According to data from the USGS, in 2025, China's phosphorus ore reserves were approximately 3.4 billion tons (a decrease of 300 million tons year-on-year, -8.1%), accounting for 4.7% (a decrease of 0.3% year-on-year). Production: According to data from the National Bureau of Statistics, in 2025, domestic phosphorus ore production was 121.47 million tons, an increase of 7.94 million tons year-on-year, an increase of 7.0%; from January to April 2026, production was 40.31 million tons, an increase of 10.6% year-on-year. Prices: Since 2025, the prices of phosphorus ore in various major production areas in China have remained stable at high levels, with high-grade phosphorus resources becoming increasingly scarce, and supply continues to tighten. The newly added production capacity is mainly low-grade phosphorus ore, leading to high-grade ore prices being stable at high levels, while low-grade ore prices remain stable to declining. Additional supply: According to data from Baichuan Yingfu, as of the end of 2025, the effective production capacity of domestic phosphorus ore was 129.31 million tons per year. The company estimates that the planned additional phosphorus ore production capacity in 2026-2028 is 17.6 million, 14.6 million, and 22.5 million tons per year, resulting in domestic phosphorus ore production of 130.27, 141.09, and 158.78 million tons in 2026-2028. Sulfur (sulfuric acid): China is the world's largest consumer and importer of sulfur, mainly imported from the Middle East, East Asia, and North America. The domestic sulfuric acid production capacity accounts for over 40%. Under tight supply and demand, the prices of sulfur (sulfuric acid) have continued to rise since 2025. Product-Side: Profit differentiation of phosphorus fertilizer and phosphorus calcium, narrowing price difference between wet and hot phosphoric acid, intensifying competition among substitutes The growth in demand for power and energy storage has helped to steadily increase the shipments of lithium iron phosphate (lithium) materials. The "phosphorus ore-yellow phosphorus/(wet) phosphoric acid-iron phosphate-lithium iron phosphate" industry chain is orderly expanding. The scarcity of phosphorus ore, especially high-grade ore, is becoming more prominent, which is expected to support its price center to maintain long-term stability at high levels. The technology of using phosphogypsum as a by-product to produce sulfuric acid helps to recycle sulfur resources and may relieve the cost pressure of sulfur (acid). Risk Warning: Unexpected policy implementation, safety and environmental protection production, and significant fluctuations in product prices.