Market inventory of iron phosphate in H1 2024

According to research, China's iron phosphate production in the first half of 2024 was 705200 tons, an increase of 42% year-on-year. 

The production of iron phosphate by non integrated enterprises is 3377900 tons, accounting for 47.9% of the total production.

1. The supply-demand pattern in H1 2024 is difficult to reverse, and the contradiction of cost inversion is prominent

From January to February 2024, January will enter the preparation stage before the Spring Festival holiday.

 In February, due to the planned Spring Festival holiday, some iron phosphate enterprises will advance the production of orders for February and prepare production in advance according to the plan. 

Insufficient production momentum in February.

 Combined with the continuous price and cost reduction of downstream lithium iron phosphate enterprises, many iron phosphate enterprises have a serious upward trend in price;

 Low production enthusiasm. Although iron phosphate enterprises try their best to gain more space for themselves during negotiations, the effect is minimal.

From March to April 2024, the price war of new energy vehicles began, orders rebounded, the operating rate of iron phosphate enterprises increased, and market supply increased.

 But in terms of cost, the spring plowing season in March and the peak season for phosphate fertilizer demand have driven up the price of phosphorus sources.

 The prices of raw materials such as ammonium and phosphoric acid have slightly increased, and the pressure of rising costs is gradually transmitted downstream, but the transmission is still blocked. 

The price of iron phosphate has only slightly increased, and the loss gap is still present. Some iron phosphate enterprises refuse to accept low-priced orders to reduce losses, resulting in some idle production capacity.

In May 2024, what caught iron phosphate enterprises off guard the most was the sudden increase in the price of industrial ammonium due to the shortage of water-soluble fertilizer supply in Xinjiang.

 Due to the lack of stock in the early stage, the cost of iron phosphate in the ammonium process skyrocketed. 

Coupled with the good performance of downstream demand, there was a strong willingness to raise the price of iron phosphate.

In June 2024, the production and supply of iron phosphate enterprises significantly decreased due to downstream production cuts and destocking at the end of the quarter. 

Iron phosphate enterprises reduced production and increased prices due to cost pressures. 

The price of ammonium remains stable at a high level, the price of phosphoric acid is also relatively stable, and the cost of iron phosphate is still relatively high. 

However, due to the obstruction of price transmission, there was no significant price increase expected by iron phosphate enterprises before,

 and the production situation in June was more conservative than in April and May.

2. Excess supply of iron phosphate, integrated enterprises reduce costs through external procurement

The supply and demand situation in the first half of 2024, except for February when the industry went out of stock due to production cuts and shutdowns during the Spring Festival,

 resulted in a negative supply-demand balance. In other months, there was an overall surplus of supply, which provided conditions for the sustained price inflation of iron phosphate. 

Due to the high inventory of some iron phosphate enterprises in the early stage, many iron phosphate enterprises have chosen to sell at a lower price to increase orders for the purpose of clearing inventory and realizing profits.

Due to the rise in phosphoric acid prices and ammonium prices in the first half of the year, the cost of iron phosphate for integrated enterprises is also relatively high.

 Therefore, there has been a situation where integrated enterprises increase the proportion of external procurement and reduce the proportion of self supply. 

The price of externally sourced iron phosphate is lower than the cost of self-produced iron phosphate, which can better cope with the dilemma of low processing fees for lithium iron phosphate.

 However, iron phosphate enterprises have become the bottom of the food chain.

3. The market landscape is constantly changing, and one knows the ups and downs

From the perspective of the iron phosphate market pattern, as integrated enterprises,

 Yuneng and Wanrun maintain a leading market share in iron phosphate, especially Yuneng, whose situation of being one dominant and multiple strong has not been broken.

 Guizhou Anda operates flexibly, and its iron phosphate products can be used for personal use or sold externally.

 Tongling Nayuan has made significant progress in the proportion of production in the first half of the year. 

Cloud Atlas performed outstandingly in the first half of the year due to its own advantages.

 Under the gradually shrinking market environment, it is wise for iron phosphate export enterprises to control production appropriately, reduce operating costs, and minimize losses.

Iron phosphate, due to its product positioning specifically for lithium iron phosphate, has a relatively single downstream flow; 

The main product of upstream phosphorus sources is agricultural fertilizer, and the bargaining power mainly lies in the upstream phosphorus chemical enterprises. 

This means that iron phosphate enterprises will face a pincer attack from upstream and downstream, and be constrained everywhere. 

Although the problem of oversupply is difficult to solve for the time being, high-quality products are still in high demand.

New players entering the iron phosphate industry often compete with low prices due to unstable foundations. 

However, lithium iron phosphate companies consider both cost and product quality. 

Typically, new iron phosphate companies or models entering the supply system take 3-6 months to verify, which is a relatively long cycle.

And in the first half of 2024, a new force that cannot be ignored will enter the iron phosphate track.

 Recycling enterprises are gradually paying attention to the treatment of waste iron phosphate slag, and the production capacity for recycling iron phosphate will begin to be put into operation. 

But the quality of recycled iron phosphate is currently uneven and has not been tested by time.

The competition in the iron phosphate market will remain fierce in the second half of the year, and profitability has become a luxury in a loss making market environment. 

Nowadays, many iron phosphate enterprises are also considering reducing production and stopping production. 

This situation often occurs in phosphorus chemical enterprises with resources, because the iron phosphate business is equivalent to a "side business" for large phosphorus chemical groups. 

If the "side business" suffers long-term losses, it is not as good as injecting blood into the "side business", but rather focusing on the main phosphorus chemical sector to ensure profitability. 

But for iron phosphate enterprises that lack resource advantages and are relatively single, they can only choose to fight back, break through the encirclement, and persist with determination.

The industry will gradually move towards centralized development, and the clearance of production capacity is cruel. 

Enterprises compete for funds, technology, management, resources, and have gone through long-term tests to open up a way out in the thorns. 

Looking back, they will find that the light boat has already crossed thousands of mountains.