Hexun Investment Advisor Wei Yugeng: Why Has Fertilizer Dropped So Much?

On March 18, Wei Yugen from Hexun Investment Advisory stated that when the market drops, it seems all stocks follow suit. Previously, those stocks that were rising but not dared to buy have now fallen, making people hesitant to enter. For example, the chemical sector has dropped significantly. There are multiple reasons behind this. First, the overall market performance is poor, and market sentiment is low, with all asset classes generally declining. Additionally, rising oil and natural gas prices and increasing inflation expectations have reduced the likelihood of interest rate cuts in the U.S., similar to the situation with non-ferrous metals. Under poor liquidity conditions, the commodities market is under pressure, and chemical products are also commodities, so they follow the downward trend. Moreover, fertilizers like phosphate and potash are also commodities, so their decline is more pronounced. The phosphate fertilizer industry is especially affected by additional policy disruptions. On the early morning of March 14, phosphate fertilizer exports were banned until August 31. Whether this restriction will be lifted remains uncertain, leading investors to sell first to avoid risks. Export bans have a significant impact on the phosphate fertilizer industry because China produces 20% of the world’s phosphate fertilizer, and foreign prices are 30% higher than domestic prices. Export sales contribute greatly to corporate profits, and cutting this off has far-reaching effects on export companies. Companies with export quotas are the most affected. However, not all phosphate chemical products are banned from export; for example, feed-grade dihydrogen phosphate can still be exported normally.

（Editor: Zhao Yanping HF094）

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