Hurricane Ida affects electricity supply of Monsanto’s American factory, what glyphosate market outlook and price trend are expected?

By Xiaobo Li from Sichuan Hebang Biotechnology & Erwin Xue from AgroPages

The price of glyphosate in Chinese market rose moderately to RMB23,000 since the 2020 Chinese Spring Festival, which was later stabilized, until August 2020, when price rose again after the flood disaster in Leshan, Sichuan, China. Thereafter, following the reemergence of Covid-19 in Hebei in November 2020 and the snow disaster in the United States in February 2021, the price rose again all the way, up to the present price of RMB52,000, having stayed at this level for four to five weeks. Today, overseas buyers have expressed worries about the future of glyphosate. 

In a recent interview with buyers, AgroPages got to know from an American customer that the selling price of glyphosate in the United States was about $27.50 per gallon, which is twice of the price of $11.50 at the end of last year. Brazilian customers said that the retail price of glyphosate had tripled year-on-year. Buyers generally said that they had to gradually pass on the price rise to distributors and farmers. Meanwhile, the current international shipping price continues to rise, it is difficult to book shipping space. To avoid delay to supplies for the next planting season and the demand in the second half of the next year, buyers have to make purchases earlier than what is planned. However, the concern is that the burndown herbicide represented by glyphosate requires big amount of financing, whilst price trend is uncertain. Moreover, it is unsure if stable supply can be maintained. 

Questionnaire:  What are your thoughts on glyphosate price and procurement?

Figure1   2013-2021 Glyphosate Price Index

In this paper, industry experts are invited to analyze glyphosate’s raw materials, supplies and price trend, which may be useful as a reference. 

Price trend of major raw materials of glyphosate

China has a glycine-based glyphosate production capacity of 500,000 tons and IDA-based glyphosate production capacity of 180,000 tons. Glycine-based production capacity accounts for 73.5% of the total glyphosate capacity in China. In this paper, observations are focused on price trend of raw materials of glycine-based glyphosate productions. 

As shown on Figure 2, glycine, methanol and yellow phosphorous are the three major materials affecting the cost of production by glycine method, followed by chlorine, sulfur and triethylamine.

Most of the raw materials for production of glyphosate were on a sharp price rise in May to November 2020. 

Figure 2   Glycine-based Glyphosate Production Flowchart

1. Acetic acid and glycine 

The price of crude oil has been a barometer of bulk commodities. The price of crude oil determines the price of coal and natural gas. Therefore, with the price rise of oil, the prices of the basic chemical raw materials of glyphosate, such as diethanolamine at downstream of petrochemical industry, glycine at downstream of coal-based chemical industry and hydrocyanic acid at downstream of natural gas-based chemical industry, are all impacted to different extent. The price of crude oil has continued to rise this year. In late June, the price of acetic acid which is the raw material of glycine soared to above RMB8,000 per ton, which however, fell to about RMB6,000 with factories’ production being brought to a higher load at a later date. Compared to RMB3,000 in the past (generally staying at about RMB2,300), the price of Yaun6,000 is already at a much higher side, which already doubled.

The table below shows that the prices of lots of raw materials of glyphosate, such as acetic acid, chloroacetic acid and methanol, started to rise in May 2020 with the price rise of crude oil, having reached a peak due to reemergence of Covid-19 in Hebei in November.

Figure2   2008-2021 WTI Crude Price Index

Figure3   2013-2021 ZCO Coal Price Index

Figure4   2008-2021 Acetic Acid Price Index

Figure5   2010-2021 Chloroacetic acid Price Index

2. Methanol 

In China, methanol is primarily produced from coal and natural gas.  There is a crude oil resource scarcity in China, relying largely on import. Therefore, the use of crude oil in making methanol or acetic acid results in a much higher cost than the use of coal. The price of coal determines the price of methanol, whilst pricing of methanol is largely subject to the crude oil price level in the international market. The table below shows that the price of methanol started to rise all the way since August 2020.

Figure6   2008-2021 Methanol Price Index

3. Yellow phosphorous 

Figure 7   Phosphorous Chemical Industry Chain

Phosphate ore is China’s advantageous resource, which is further processed into wet phosphoric acid and yellow phosphorous. Due to the large amount of electricity consumed for production of yellow phosphorous and in light of the abundant hydropower resources in the three southwest provinces, the yellow phosphorous production is centralized in the three provinces of Yunnan, Guizhou and Sichuan with rich hydropower resource. 

Wet phosphoric acid is obtained via high to low concentration transformation of high-grade phosphate ore, which is then purified, being mainly used as phosphatic fertilizer.

Yellow phosphorous is obtained via electrolysis (at power consumption of 15,000 kwh / ton), its downstream products are mainly phosphate (46%), glyphosate (26%) and phosphorous pentoxide and phosphorous trichloride.

Wet phosphoric acid may gradually seize the market share of furnace phosphoric acid, via the advantage of its technical advancement. 

Yellow phosphorous shows seasonal price rise and fall every year. In generally, yellow phosphorous price falls in summer and rises in winter. However, there is a special situation this year, when power supply is restricted in Yunnan while flood season in the three southwest provinces comes rather late, having resulted in a power shortage. Hence, the price of yellow phosphorous rose in summer as well. To this end, it is expected that the price will still rise in the dry season in winter.  Today China yellow phosphorous price up to RMB 31000/ton, last year’s price is RMB 15000/ton.  Recently, a large number of Western Yellow Phosphorus plants have ceased production, causing prices to continue to rise.

Figure8   2013-2021 Yellow Phosphorus Price Index

Glyphosate supply status quo

1. Global supply of mainstream glyphosate 

Globally, glyphosate is supplied from the Unites States (former Monsanto) and China. Over recent years, Chinese glyphosate production has become more centralized within prime manufacturers after round and round of industry consolidation. 

Table 1   Worldwide Mainstream Glyphosate Manufacturers (000 tons)

A Summary of Glyphosate Supply and Price Changes in the Last Years

It is a combination of various reasons that has pushed glyphosate’s price rise all the way.

2. Global supply of Monsanto

Monsanto possess a production capacity of 370,000 tons of glyphosate (distributed in the United States, Belgium, Argentina and Brazil), the main production base is located in the United States. Monsanto’s US factory supplies the intermediate PMIDA to factories in Belgium and Argentina all year round.

According to the export statistics of the United States, xxx tons of PMIDA were exported from January 2016 to June 2021. In addition to PMIDA, US also exports the finished product glyphosate, but the export volume of glyphosate technical and formulation is completely different from that of PMIDA. As this does not have a big impact on the supply pattern, there is no need to address the quantity difference between glyphosate and PMIDA exported by Monsanto.

1)The production volume in Belgium may have stayed at ... tons and production in Argentine stayed at ... tons.

2)In the past, Monsanto United States (Monsanto US) used to export glyphosate technical and PMIDA to Brazil. The peak volume of glyphosate technical exported to Brazil reached ... tons in 2019. In the same year, China’s export of glyphosate technical to Brazil reached the peak volume of 100,000 tons. In that year, Monsanto United States exported xxx tons of PMIDA to Brazil, suggesting that the peak demand in Brazil over recent years is about ...

3)In the past, Monsanto United States (Monsanto US) used to export glyphosate technical and PMIDA to Brazil. The peak volume of glyphosate technical exported to Brazil reached ...

4)Combined with the reduced trading of glyphosate technical, from October 2020 to the first half of 2021, Monsanto’s supply of glyphosate to Brazilian market alone decreased ....

Please complete the questionnaire :  What are your thoughts on glyphosate price and procurement?  And leave your contact in it, AgroPages will send you full version of the glyphosate report with data details. Or any inquiry you may contact: 

Mr. Erwin Xue: erwin@agropages.com ; agropages@vip.163.com 

Future price trend of glyphosate 

1. Supply and demand perspectives 

Supply side:

1)The last round of price rise of glyphosate in China was in 2014, but situation is different now from the past. At that time, there were many small glyphosate factories in coastal region running on both glycine method and IDA method. After market development and consolidation for so many years, the supply pattern has become stable. The consolidation of Fuhua and Jiangshan is another important milestone in the history of development of glyphosate in China.

2)Monsanto possesses xxx-ton capacity in Argentina, which may be intended to increase supplies to Brazil.

Demand side: 

1)In 2021, in the Unites States, planting area of soybean is 36 million hectares and that of corn is 37 million hectares; In Brazil, planting area of soybean is 38.30 million hectares and that of corn is 19.44 million hectares.

In 2021, In Brazil, the newly increased soybean planting area is 1 million hectares and newly increased corn planting area is 600,000 – 700,000 hectares; In the United States, the newly increased soybean planting area is 2.8 million hectares and newly increased corn planting area is 480,000 hectares. Demand for non-selective herbicides is expected to still increase.

2)Brazil imported 8,000 – 9,000 tons (converted at 100%) of paraquat from China and 7,000 tons from Syngenta UK. The prohibition of paraquat in Brazil provides non-selective herbicide with a great market space (paraquat with such volume shall theoretically cover planting area of 25 million hectares). While the registration for three dicamba formulations were vacated in 2020, they later received new and amended registrations through 2025.

3)In the first half of 2021, Brazil imported 6,000 tons of diquat technical concentrate which is converted to 2,400 tons at 100%; there is also a volume of 2,500 tons of glufosinate, which may not fill up the gap of paraquat; moreover, there is a 20,000-ton (converted at 100%) decrease in the glyphosate imported by Brazil in the first half of the year.  

To sum up, there is strong market support to the growth of burndown herbicides. 

2. Foreign exchange 

In the first half of 2021, dollar devaluation happened, when price of crude oil rose, resulting in the high price level of glyphosate’s raw materials originated from coal and gas.

3. Policies 

 In terms of short-term policy, when autumn and winter come in, 26 cities + Beijing and Tianjin may engage restriction on industrial production. Also, on the occasion of the opening of Winter Olympic Games (during the Olympic Games, the Chinese government will exhibit the superiority of Chinese social system to the world and the satisfactory containment of Covid-19), the area and time of restriction of industrial production may go beyond the 26 + 2 region. Beijing, Tianjin and Hebei are primary the locations of supply of glyphosate’s raw materials such as glycine and paraformaldehyde. As a result, a big impact is foreseen.

Summary

Through analysis of long-term raw material price index, it is found that the price of glyphosate in China is affected by the price fluctuation of raw materials upstream, but the price impact is not immediately passed on to downstream sectors, which will take some time until downstream sectors are affected. Furthermore, the factors affecting the price fluctuation range are complex. The black swan events in the past two years mentioned in this paper acted like a catalyst, on top of the impacts of Covid-19, dollar devaluation and the global industrial chain restructuring. In this circumstance, the price of glyphosate has skyrocketed (lots of bulk chemical materials appeared the same as glyphosate) to a historical high. How will it go next?

There are recently reports saying that the hurricane in the United States will suspend the electricity supply in Monsanto’s US factory till September 29 or may be longer. In addition, there will be a power blackout to millions of residents for at least one month. Today glypphosate price in China already up to 56000RMB/ton, will it keep on rising?  

The procurement season in Australia and the United States is drawing near and China’s winter storing season is drawing near. Will this lead to the long-stay high price of glyphosate?

For overseas customers, will you wait and see or make up your mind to place orders?

For Chinese suppliers, will you worry about a potential risk of breach of contract?

Please complete the questionnaire :  What are your thoughts on glyphosate price and procurement? And leave your contact in it, AgroPages will send you full version of the glyphosate report with data details. Or any inquiry you may contact: 

Mr. Erwin Xue: erwin@agropages.com ; agropages@vip.163.com 

2021.09.28-29   Hangzhou, China 

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