The price of yellow phosphorus and its downstream chemical products soared due to environmental protection

On July 3, CCTV's "Focus Interview" focused on the pollution problem of the yellow phosphorus plant in the upper reaches of the Yangtze River, which triggered a comprehensive improvement of the yellow phosphorus industry in the southwest region. The Yunnan, Guizhou and Sichuan regions have always been an important area for my country's yellow phosphorus production.

According to data from the research report of Shengang Securities, the price of yellow phosphorus has risen sharply since July 9, while the recent cumulative increase of the yellow phosphorus market in Yunnan, Guizhou and Sichuan, the main producing area, has reached 43.4%, 39.5%, and 42.4% respectively. The ex-factory quotation has been raised to the full prepayment of 25,000 yuan/ton.

The yellow phosphorus price increase caused by this round of environmental protection rectification, since July 3 this year, Chengxing shares (600078.SH) share price has risen by nearly 60% in less than half a month. Listed companies such as Xingfa Group and Yuntu Holdings have also increased by more than 18% and 14%. The environmental dividend is highlighted.

In the current market, in addition to the yellow phosphorus production enterprises for their own use, the consumption of commercial phosphorus is 800,000, and the consumption of the pesticide industry accounts for about 60% of the total consumption of yellow phosphorus. Among them, the production of glyphosate consumes about 230,000 tons of yellow phosphorus each year, accounting for about yellow phosphorus in the pesticide industry Consumption 50%.

Affected by the increase in the price of yellow phosphorus, the price of glyphosate, which has the highest proportion of single product consumption, jumped 4,000 yuan/ton, from 23,000 yuan/ton before to 27,000 yuan/ton.

At present, the main production methods of glyphosate are the glycine method and the diglycine method. According to Anxin Securities' estimates, the price of yellow phosphorus per ton will increase by 10,000 yuan, the cost of glyphosate produced by the glycine method will rise by 3,700 yuan/ton, and the cost of glyphosate produced by the diglycine method will rise by about 3,000 yuan. Although Hebang Bio is the world's leading manufacturer of full-process glyphosate, its consumption of glyphosate yellow phosphorus per ton is also around 260 kg, and its impact on costs will reach 2,600 yuan/ton.

It can be seen that the aforementioned price increase of glyphosate only offsets the rising cost of basic yellow phosphorus. Recently, a number of securities companies released research reports that, according to the industry's cost price transmission trend, glyphosate prices will continue to rise in the future.

On July 9, 2019, the Ministry of Ecology and Environment issued the "Technical Guidelines for the Special Investigation of the "Three Phosphorus" in the Yangtze River", which put forward more stringent environmental governance requirements for phosphorus-related enterprises. It is foreseeable that from the phosphate mining industry to the products and processes containing phosphorus. It will also lead to a strict "physical examination."

Judging from past results, it is a high probability event that companies that do not meet the standards will reduce production, suspend production, or even be shut down. Although the result of strict "physical examination" is not a complete shutdown, it will certainly eliminate some backward and environmentally-friendly production capacity. The elimination of production capacity may trigger new contradictions between supply and demand.

The glyphosate industry, the largest downstream product of yellow phosphorus users, falls within the scope of the aforementioned "Tri-Phosphorus" special investigation, and there is even a special chapter that regulates the standards of glyphosate and glyphosate mother liquor.

Among the current A-share listed companies, the top five companies that produce glyphosate (Note: Glyphosate and Glyphosate are converted into glyphosate) are Xingfa Group 180,000 tons (glycine method) and Hebang Biotechnology 120,000 tons. (Glyphosate method), Xin'an Co., Ltd. 70,000 tons (glycine method), Jiangshan Co., Ltd. 70,000 tons (30,000 tons of glycine method grass, 40,000 tons of diglycine method) and Yangnong Chemical 40,000 tons (Diglycine method) ).

Among the above-mentioned companies, the most competitive advantage and investment value is Xingfa Group, which ranks in the forefront of its glycine production capacity and benefits from its own industrial chain of yellow phosphorus; Hebang Bio's production capacity of glyphosate is ranked at the forefront, although outsourced Yellow phosphorus, but it has announced the price lock of yellow phosphorus raw materials in the early stage, and the additional environmental protection investment of 850 million yuan in 2017 and 2018 can be described as a "shen operation" corresponding to the current environment! Compared with the glycine method, the glyphosate produced by the glyphosate method used by Hebang Biotechnology also has the advantage of reducing the consumption of yellow phosphorus by 50 kg per ton.

The above two companies have obvious leading effects, and based on their own advantages, each has become an industry unicorn. Hebang Bio-Glyphosate occupies 60% of the global market share, and in 2019, it is still implementing a capacity utilization upgrade project. After completion, it will reach a production capacity of about 150,000 tons of glyphosate, and further reduce costs and stabilize the industry leading position. Xingfa Group has its own phosphate rock, yellow phosphorus, and 180,000 tons of glycine-processed glyphosate also firmly occupy the cost and scale advantages.