The inflection point of the hottest chemical urea

Dynamic report of chemical urea industry: the inflection point is confirmed, and it is optimistic about the reversal of urea boom

since 2006, the main expansion of nitrogen fertilizer production capacity in the world has come from China; According to the prediction of the International Fertilizer Association (IFA), if the change-over switch is turned to the "fast back" position, the expansion of global urea production capacity will peak in 2016 and 2017, while the growth rate of domestic production capacity will decline significantly. The global new nitrogen fertilizer production capacity mainly comes from Indonesia and Malaysia in Southeast Asia, Egypt, Nigeria, Gabon, Tanzania and Angola in Africa, as well as the United States and other regions; Since 2018, the expansion of overseas urea production capacity has slowed down, especially under the high natural gas price, the decline of production capacity growth is expected to exceed expectations. IFA predicts that the annual growth rate of global nitrogen fertilizer demand in will be about 2.3%. With the end of the rapid expansion period of global nitrogen fertilizer in, the growth rate of demand will exceed the growth rate of production capacity. In, the global nitrogen fertilizer operating rate has a high probability of bottoming out and stabilizing, and is expected to usher in a cyclical inflection point

the pressure of excess domestic urea production capacity has eased, and the supply gap in the medium and short term has expanded.

according to the China Nitrogen Fertilizer Industry Association, the new domestic urea production capacity will only be about 6million tons in the next two to three years. Considering that the production capacity will continue to withdraw after the superposition of national policy regulation + environmental protection pressure + spontaneous elimination of high-cost production capacity, and the pressure of excess domestic supply will gradually ease, we judge that the probability of domestic urea production capacity will decrease net in the next few years. At present, the domestic urea operation is less than 50%, and the monthly output is only about 4million tons. At present, the indirect method of dealers' light storage progress has only% varieties, and the inventory of the whole urea industry chain is extremely low. At present, the urea supply is tightening during the light storage period. With the delay of light storage under the dealers' game attitude, the contradiction between supply and demand in the spring cultivation and fertilizer preparation period next year is expected to erupt. We believe that the market is generally worried about the low probability of large-scale resumption of production. On the one hand, the cost support is significant. On the other hand, we judge that a considerable part of the production capacity has been shut down for a long time and has not maintained the minimum production operation. Therefore, the price in November deviated from the commencement

the influencing factors of downstream corn are gradually digested, and the domestic demand for urea is expected to improve

we judge that the probability of corn price has bottomed out this year. With the gradual digestion of negative factors such as the cancellation of temporary storage policy and the gradual implementation of corn subsidies, the price of corn is expected to stabilize and rebound, and farmers' demand for fertilizer per mu is rigid, so the risk of continued decline is small. The impact of the reduction of corn planting area on the total consumption of urea is far lower than market expectations. The possibility of a sharp decline in agricultural urea demand is low, and the probability will stabilize in 2017. On the whole, the elasticity of urea demand is insufficient, not only the upward elasticity is insufficient, but also the downward elasticity is extremely limited. The demand growth of industrial urea such as wood-based panel and vehicle urea is sufficient to neutralize the risk of corn demand by placing a container under the overflow nozzle, and the overall demand is expected to improve marginally

investment suggestions

the inventory of the whole industrial chain is extremely low, and the cost rise + supply contraction + demand improvement promote the confirmation of the inflection point of the urea inventory replenishment cycle. The price will continue to rise in the next half year, with strong certainty, and is expected to usher in the relay resonance of the global urea production cycle. We are optimistic about the reversal of the urea boom, and firmly recommend the urea sector. The recommended order is Yangmei chemical industry, Hubei Yihua chemical industry, Luxi Chemical Industry, Hualu Hengsheng

risk tip: the price of upstream raw materials fluctuates significantly; The progress of capacity removal was less than expected