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Top 20 Chinese Agrochem Firms: Seeking New Chance in Adversity
Nov. 2, 2015
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Mickey Shan
Senior Editor; China Marketing Director
Recently AgroPages issued the list of top 20 Chinese agrochemical firms in 2014. The year of 2014 was a hard one for manufacturers of China, where domestically the supply of technical product exceeded demand, prices in general went down and environmental compliance requirement became more stringent, while overseas market was put into a recession because of the decreased prices, unfavorable weather and exchange rate which had affected China’s agrochemical export. Among the top 20 Chinese agrochemicals, 14 enterprises achieved growth and 5 experienced negative growth. The total sales of the top 20 amounted to Yuan 51.32 billion; the YOY growth slowed down to 8% from the 25% last year. In 2014, both the agrochemical industry and agrochemical enterprises were under an increasing pressure of transformation and upgrading.
2014 is also a year full of opportunities and challenges for Chinese agrochemical enterprises, who have continued to seek new mode and orientation of development under the changes of the industry. The effort has been evident, such as the comprehensive agrochemical service concept which has been turned into practice, presence of some enterprises at the E-business platform, new business deployment or upgrading by more enterprises in accordance with their special features which gave them chances of the first move advantage.
Glyphosate market drags down business performance of manufacturers
After years’ market downturn, glyphosate price started to rise a little bit in 2013 when immediately lots of small or medium-sized manufacturers got back to production which resulted again in an excessive supply of glyphosate in 2014. Due to weather impact, pesticide market started very slowly in 2014 and suffered downturn globally. Although glyphosate price went up for some time in the first half of 2014, the demand in the second half of 2014 which is normally the high season in the international market was quite weak, far from the expectations. The depressed glyphosate market dragged down Chinese glyphosate manufacturers to certain extent like Wynca, Nantong Jiangshan, Fuhua-Tongda and Jinfanda.
Wynca which ranked No.1 on the top 20 achieved sales of Yuan 3.80 billion in 2014, suffering a 50% decrease of gross profit though maintaining a 7.06% growth rate. Jinfanda and Fuhua- Tongda which ranked respectively No.5 and No.9 are both prime glyphosate manufacturers suffered heavy recessions in 2014, becoming the 2 most sales-decreased enterprises on the list of the top 20. Jinfanda experienced a 14.55% negative growth; Fuhua- Tongda’s sales decreased by 22% and its ranking on the top 20 also dropped. The No.15 ranking Nantong Jiangshan achieved sales of Yuan 2.10 billion, 2.69% down year on year; its glyphosate sales dropped by 7.53% year on year, down to the Yuan 1.73 billion.
Nevertheless, there was good side of the glyphosate market when it was generally in a downturn. In 2014, Monsanto’s Roundup acted by Sinochem International as an Asia-Pacific agent covering Australia and Philippines had a good performance. Its sales in China reached a historically high record, accounting for nearly 30% of China’s glyphosate market. Moreover the Rico (450g/ l glyphosate AS) of Nantong Jiangshan landed Australia for the first time, having achieved sales of 3,000 tons with an income of Yuan 62.10 million.
New strategic adjustment and industrial deployment to speed up
2014 saw obviously intensified consolidation of Chinese agrochemical industry, which is of help to optimization of industry resources to the benefit of enhancement of competitive edge of Chinese agrochemical industry. In December 2014, Sinochem Group restructured its pesticide business unit, where all equity stakes of Sinochem Agro, Shenyang Kechuang, Sinochem Hong Kong, Brazil and Argentina are consolidated and put into Sinochem International. The consolidation enabled the annual pesticide sales of Sinochem International of 2014 to jump to Yuan 3 billion from Yuan 1.3 billion of 2013, being listed on the top 20 for the first time and ranking No.7.
Red Sun possesses 3 complete environment-friendly pesticide industry chains covering pyridine base, hydrocyanic acid and pyrethroid, which gives the advantage of the “intermediate, technical product, formulation, sales channel” whole-course industry chain. In 2014, the company carried out transformation and optimization of product range, resulting in obviously increased sales of herbicide led by paraquat. The increase of gross margin drove increase of profitability. Its pesticide sales were 18.83% up year on year, ranking No. 3 on the 2014 top 20.
Zhongshan Chemical achieved a leap growth, 141% up year on year, enabling it to be listed on the top 20 for the first time and ranking No.10 with sales of Yuan 2.59 billion. The jump of sales was attributable to the increased product varieties. Initially being a dedicated triazine herbicide manufacturer, Zhongshan Chemical upgraded itself to be a general pesticide manufacturer covering production of fungicide including prothioconazole, pyraclostrobin, trifloxystrobin and picoxystrobin, as well as dinotefuran insecticide. Via the cooperation with multinationals and new market expedition, the company went on a rapid expansion track.
Paraquat is a leading product of Luba, which was in a short supply in 2014 due to shutdown of production of aqueous solution agent, resulting in a higher price all the time, which was the reason for Luba’s rising performance in the year. While herbicide market was down in general, the growth rate of Luba’s pesticide sales reached 32.98%, with the ranking having lifted from No.18 of 2013 up to No.16. Future growth of Luba depends on the government policy on paraquat substitution and market expedition result.
To shape an agricultural material platform via internet
The land transfer policy continues to move forward and agricultural production is being further intensified step by step. Modern agricultural production requires advanced means of production, easy agricultural material sales platform and professional agro-technical service. As driven by the market demand and capital fund, the environment to cultivate agricultural material giant is becoming mature with each passing day. In 2014, a number of public listed Chinese agricultural or agricultural material companies started trials of internet-based service, of which to establish agricultural material platform, information platform and to integrate upstream and downstream agricultural material industries become a main approach.
In 2014, the No.14 ranking Noposion, via the booming internet, achieved a successful transition from China’s largest formulation manufacturer into China’s largest crop protection service provider and agricultural material distributor. In 2014, Noposion established the O2O online / service platform offline Tian Tian Quan and the B2B agricultural E-commerce njw88 to have achieved 27.56% growth reaching sales of Yuan 2.2 billion by virtue of the new business mode.
The No.12 ranking Jiangsu Huifeng is China’s first agricultural material e-commerce practitioner. In November 2014, Huifeng’s share-participated agricultural material platform 16899.com was launched, which brings benefit to the business growth of Huifeng. In the same year, Huifeng’s customized products epoxiconazole and dithianon were sold at large volume and sales of intermediates were increased, which helped a lot to the sales growth of Huifeng. It is projected that the value of 16899.com platform for the growth of Huifeng will be much reflected at a later stage. In the meantime, pesticide warehousing and logistic service of Huifeng are expected to become a new source growth. Jiangsu Huifeng is expediting a more diversified business development.
Conclusion
In general, the concentration ratio of Chinese pesticide industry is still at a lower side and also appearing in the downstream of the international industry chain, being unable to develop new active ingredients toward upstream of the industry. A pesticide manufacturer has to be innovative in service and brand establishment to achieve further growth. On the other hand, the market demand over recent years has forced manufacturers to lay more emphasis on terminal product, downstream business and distribution channel. With the development of internet particularly the mobile internet, a radical change is foreseen on manufacturer’s production and marketing mode. Manufacturers ought to analyze the business tendency and find a right approach according to its own characteristics.
Source: AgroNews
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