Overseas chemical production capacity faces further disruptions, with the global chemical supply and demand pattern tilting toward the domestic market. The fertilizer concept continues to rise.

On April 7, the fertilizer concept continued to trend higher. Lufeng Chemical (000830.SZ) hit the daily limit. Chitianhua (600227.SH), Lutianhua (000912.SZ), Six Kingdoms Chemical (600470.SH), Jinzhengda (002470.SZ), and Luhua Technology (600691.SH) had previously hit the daily limit as well. Hualu Hengsheng (600426.SH), Huarong Chemical (301256.SZ), Sichuan Meifeng (000731.SZ), Kailong Shares (002783.SZ), and others led gains.

On the news front, on April 7, an explosion occurred at the Jubail industrial zone, a major global petrochemical production hub. The base’s annual output is about 60 million tons of petrochemical products, accounting for 6%-8% of the global total. The supply-side shock directly boosts market expectations for higher prices of chemical products. Combined with elevated energy prices in Europe, Japan, and elsewhere, production costs continue to rise. The pace of shutting down overseas high-cost chemical capacity is accelerating further, and the global chemical supply-demand balance continues to tilt toward domestic markets.

A recent report released by the Food and Agriculture Organization of the United Nations shows that energy price increases related to conflicts in the Middle East have led to a sharp rise in fertilizer costs. If the situation remains volatile, in the first half of this year, global fertilizer prices may be 15% to 20% higher than normal, thereby lifting global agricultural costs and food prices.

Markusimo Torero, chief economist of the Food and Agriculture Organization of the United Nations, said that the Strait of Hormuz is a key global energy and fertilizer transportation corridor, carrying about 20 million barrels of oil per day, or about 35% of global crude oil transport volumes. At the same time, it also handles large volumes of liquefied natural gas and fertilizer trade transportation. Sulfur in the Gulf region is also an important input for phosphate fertilizer production. Disruptions to shipping routes have quickly been transmitted to the global food and agriculture system.

Analysts point out that China’s chemical industry chain has outstanding safety and cost advantages, making it more stable in the global supply chain. Relying on a diversified raw-material system, mature coal-to-chemicals replacement processes, large-scale production, and significant cost advantages, domestic chemical companies are leading globally in risk-resilience. The continued clearance of overseas capacity will directly help China’s chemical industry increase its share in global markets and improve its pricing power. Over the medium to long term, industry sentiment and activity are expected to keep moving upward. Today, the CSI Petrochemical Industry Index surged by more than 3% at one point, and the sector’s trading activity has increased notably.