SunSirs: Phosphate Ore Demand Rises on Chemical Sector’s Price Uptrend

Shanghai Economic Finance November 12, 2023, Electric: Benefiting from the impact of the chemical price increase trend, the price of phosphate rock continues to operate at a high level. According to data from Baichuan Yingfu, on November 11, the domestic market average price of phosphate rock with 30% grade was 1017 RMB/ton, the market average price of phosphate rock with 28% grade was 945 RMB/ton, and the market average price of phosphate rock with 25% grade was 758 RMB/ton.

A senior executive of a listed phosphorus chemical company told reporters that in the short term, the balance of supply and demand in the phosphate rock market is still difficult to break, and the price is expected to continue to operate at a high level under the influence of factors such as the continuous tightening of environmental protection policies, the steady growth of new energy demand, and the slow implementation of new production capacity. The industry is accelerating its transformation towards resource efficiency and industrial chain integration.

"The company is still in a state of demand exceeding supply in terms of orders in hand," said a relevant person in charge of Guizhou Kaipu Co., Ltd., a state-owned enterprise, according to an interview with the reporter. The company also has several production bases dedicated to the deep processing and product manufacturing of phosphorus chemical industry. It was revealed that even with its own mines, the company still cannot meet all the production needs of the downstream industry, and it also needs to purchase a portion of the ore from the external market to ensure the sustainable development and utilization.

The above-mentioned senior management of the phosphorus chemical listed companies explained that in 2024, the total capacity of domestic phosphate rock is about 150 million tons, slightly lower than that of 2023, but the actual turnover is limited, mainly concentrated in Hubei, Sichuan, Guizhou, Yunnan regions, and the market turnover is low. Although many enterprises disclose new phosphate rock projects, due to the long cycle from obtaining mining rights to built and put into production, it generally takes 2-3 years or even longer, the speed of new capacity is not as fast as market expectations.

The senior executive told reporters that the downstream demand for phosphate rock is mainly composed of traditional phosphate fertilizers and emerging lithium battery materials such as lithium iron phosphate. As the largest consumer, the production capacity of phosphate fertilizers is limited by national environmental protection policies, and the overall stability is maintained. However, the rapid development of the new energy industry, especially the widespread application of lithium iron phosphate materials, is gradually diverting phosphate rock resources and has become an important force to promote the growth of demand.

According to industry estimates, it takes about 2.5 to 4 tons of phosphate rock to produce 1 ton of iron phosphate, with the specific figure varying depending on the grade of the ore and the production process. With the lithium iron phosphate (LFP) cathode material production set to exceed 2.5 million tons in 2024, the corresponding demand for phosphate rock has approached 7 million tons, further straining the resource.

According to reporters' sorting, at present, a number of A-share companies, such as Yuntianhua, Xingfa Group and Chuanheng Shares, "hold" rich phosphate mines, and are expected to show strong competitiveness in the market with the help of resource advantages.

As one of the largest phosphate mining and processing enterprises in China, Yuntianhua has a phosphate mine reserve of nearly 800 million tons, an original ore production capacity of 14.5 million tons per year, a washing and selection production capacity of 6.18 million tons per year, and a flotation production capacity of 7.5 million tons per year. Its existing phosphate mine flotation project (4.5 million tons per year) is under construction, and the underground mining project of the second mine of Kunyang Phosphate Mine, a subsidiary, has entered the trial operation stage, which is expected to further enhance the self-sufficiency capacity of resources.

Xingfa Group has about 395 million tons of phosphorus mine resources with mining rights, and has a large number of phosphorus mine resources in the stages of prospecting and prospecting to mining through participating in or controlling subsidiaries, with about 410 million tons of proven reserves.

Chuanheng shares has a production capacity of more than 3.2 million tons of phosphate ore per year, its holding subsidiary Fulin Mining has the Xiaohe Phosphate Mine, Xinqiao Phosphate Mine and Jigongling Phosphate Mine, its holding subsidiary QianRMB Geological Survey has the mining rights of the Laoshizhai Phosphate Mine, and its participating company Tianyi Mining has the Tiger Cave Phosphate Mine.

In the third quarter of this year, several listed phosphorus chemical companies achieved a significant increase in net profit. The net profit of Yuntianhua, Chuanjinuo and Chuanfa Longyang was 1.968 billion RMB, 127 million RMB and 198 million RMB, respectively, an increase of 24.30%, 189.43% and 50.91% year-on-year.

"With the intensification of environmental protection policies, backward production capacity will be gradually phased out," said an executive of a listed phosphorus chemical company. Relevant departments have successively introduced the "Action Plan for Promoting the Efficient and High-Value Utilization of Phosphorus Resources" and the "Action Plan for the Comprehensive Utilization of Phosphogypsum", requiring that by 2026, the sustainable guarantee capacity for phosphorus resources will be significantly enhanced, and the comprehensive utilization rate of phosphogypsum will reach more than 65%. "Under the pressure of environmental protection, some small and medium-sized phosphate mines will gradually exit the market due to their inability to meet the standards, which will further tighten the supply side."

The person judged that the price of phosphate rock will still remain stable in the next one to two years. "On the one hand, the price formation mechanism of phosphate fertilizers and phosphate rock supports each other; on the other hand, the rise in the price of raw materials such as sulfur has also increased the production cost of phosphate fertilizers, indirectly supporting the price of phosphate rock. In addition, leading enterprises have gradually achieved efficient utilization of low-grade ore through technology improvement, which has also alleviated the pressure on resources to a certain extent."

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