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2015 China Agrochemical Business Indicators
Mar. 10, 2016
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Mickey Shan
Senior Editor; China Marketing Director
- Growth of output slowed down
- Price and volume of export / import dropped for first time in past 5 years
- Prices wandering at bottom all year round
- Industry profitability rising steadily
The global agrochemical industry of 2015 suffered downturn after having experienced continuous fast growth. Prices of main farm products including corn and soybean went down; resulting in farmer’s reduced spending on agrochemical product, which caused high inventories in 
distribution channel. Cost of land, equipment and energy went up; multinationals have made plans for strategic adjustment to cope with the hard times presently. As a large agricultural country and the world’s largest pesticide net export country, China was no doubt affected by the international market situation, also by the changes and challenges resulting from the policies of the year released by Chinese government.
distribution channel. Cost of land, equipment and energy went up; multinationals have made plans for strategic adjustment to cope with the hard times presently. As a large agricultural country and the world’s largest pesticide net export country, China was no doubt affected by the international market situation, also by the changes and challenges resulting from the policies of the year released by Chinese government. Chinese environmental compliance requirement of the year was challenging. The Ministry of Industry and Information Technology stopped pesticide production filing, thus new capacity is restricted, industry entry continually became high, and industry was more centralized. The pesticide and fertilizer use zero-growth program initiated by Chinese Ministry of Agriculture at the year-beginning set a high requirement on business development. Paraquat will be phased out soon, glyphosate dispute is continuing, high-toxic and high-risk pesticide is prohibited one after another. All these issues kept down the prices of Chinese domestic staple commodities at low level. Hereinafter, AgroPages would use indicators of pesticide volume, import/export and industry profitability to illustrate the Chinese pesticide market situation of 2015.
Growth of output slowed down
3 Major chemical pesticides dropped
3 Major chemical pesticides dropped
Over the last 10 years, Chinese pesticide production has ascended steadily. Except for 2013, from 2006 to 2014, the annual growth rate in average was nearly 20% (technical material as converted), especially in 2012 the pesticide output increased 34% year on year having reached 3.55 million tons, attributable to the hot production and sales of glyphosate.
In 2015, the output of Chinese chemical pesticide still maintained at high level, however the growth rate obviously slowed down for reasons of environmental regulation and restructuring of the industry. From the statistics of the current year, a total of 3.741 million tons of pesticide technical was produced in 2015, which dropped for the second time in the last 10 years, compared with the 3.744 million tons of 2014 while the growth rate is much reduced compared with the 17.4% of last year.
An analysis of the output of pesticide varieties of 2015 shows that the 3 major pesticides – herbicide, insecticide and fungicide, have all dropped, of which fungicide dropped significantly. Based on the calculations in the yearly statistics, China produced 182,126 tons of fungicide from January to December 2015, which was 20.87% down over 2014. Herbicide is a main pesticide, which maintained growth previously, but dropped a little bit in the year by 1.61% over 2014, down to 1,773,997 tons. Insecticide output was 513,536 tons, 8.38% down year on year.
Category of export indicates that a new tendency is happening to Chinese pesticide export, where technical material export volume and amount were not only dropping in successive years but also their proportion in the total export decreased as well. Formulation export volume and price both dropped in 2015, but their proportion in total export were increasing year by year, particularly if calculated by volume, formulation export has become China’s main force of pesticide export.
Price and volume of export / import dropped for first time in past 5 years
Export structure started to change quietly
Export structure started to change quietly
China is the world’s important pesticide production base. As a large agricultural country, China consumes itself large volume of pesticide, but is also the world’s largest net pesticide export country, which has been growing steadily over recent years. However in 2015, Chinese pesticide import / export suffered both price and volume fall for the first time in the past 5 years.
According to ICAMA(Institute for the Control of Agrochemicals, Ministry of Agriculture), China imported totally 52,800 tons of pesticide from January to November 2015, amounting to $616 million, which was both 2-digit drop, respectively at 24.43% and 17.32%; from January to November, a total of 1.3815 million tons of pesticide were exported, 15.85% down year on year. The export amount was $6.67 billion, 23.86% down year on year. These figures show that pesticide import / export was facing difficulties.
Category of export indicates that a new tendency is happening to Chinese pesticide export, where technical material export volume and amount were not only dropping in successive years but also their proportion in the total export decreased as well. Formulation export volume and price both dropped in 2015, but their proportion in total export were increasing year by year, particularly if calculated by volume, formulation export has become China’s main force of pesticide export.
Considering the above, also taking into account China’s adjustment to the pesticide export tax return policy, as well as the national “Belt and Road” strategy, it shows that Chinese pesticide enterprises are taking the opportunities to adjust product structure and raise their strategic position in the global pesticide industry chain, hoping to move from industry’s front end which is low-profit technical material export into the rear end which is high-profit formulation product, this would provide enterprises with better profitability. Enterprises are building up their brand image instead of being dependent on multinationals to enter the terminal market of destinations. Via this approach, the technical level of Chinese pesticide industry is also going to be elevated.
Prices wandering at bottom all year round
Depressed market may continue
Depressed market may continue
In 2015, market demand both at home and abroad was low, Chinese domestic policy on high-toxic pesticide was becoming stringent. While Chinese pesticide industry suffers the over-capacity problem, demand was low, resulting in low-load production. Prices of above 90% of the pesticide technical dropped to different degree. Taking a look at the major categories shows that herbicide and insecticide dropped more seriously while fungicide was basically flat. Among the 8 staple pesticide technical varieties as always addressed in the “Agrochemical Market Monthly Report”* issued by AgroPages, except for carbendazim and mancozeb which had good market performance, all other products were wandering at bottom while glyphosate, butachlor and acetochlor dropped significantly.
At present Chinese pesticide industry is at a critical period of adjustment and upgrade. The depression of market is expected to continue in 2016, with the exception of small number of varieties. Pesticide prices will directly affect the competitiveness and the profitability of enterprises. Under the great market pressure, Chinese agrochemical enterprises are speeding up the process of restructuring. Just recently the subsidiary company Sanonda of China National Agrochemical Corporation (CNAC), announced termination of sales of formulation product. CNAC would incorporate all its agrochemical business in ADAMA. The adjustment and restructuring will play an important role in the reform and upgrading of the whole agrochemical industry of China.
Price trend of 8 major pesticide products in 2015 （Jan-Dec）
Industry profitability rising steadily
Out-of-date enterprise to be phased out
Chinese pesticide industry is rather decentralized. According to Chinese National Bureau of Statistics, there are currently 2,000 enterprises, including over 600 technical material production enterprises and quite a lot of small production enterprises. In 2015, pesticide upstream crude material prices went down, which was in favor of pesticide manufacturers for cost control, resulting in the sales growth and profit increase. The information of Chinese National Bureau of Statistics indicates that from January to November 2015, the industry’s main business income and profit respectively increased by 5.7% and 5.1% reaching $42.74 and 2.98 billion, calculated at the current exchange rate.
However from general market perspective, the policies of 2015 were becoming stricter, market demand was low and competition was intense, which are well reflected in the industry profit data. Statistics shows that the number of enterprises suffering annual loss increased by 2.7%, with a loss of $772 million, 62.2% up year on year. A number of technically out-of-date enterprises with small capacity and less viability will be phased out.
It is worthy of note that China’s bio-pesticide industry started quite late but its increase of profitability appears to be faster than chemical pesticide. From January to November, China’s bio-pesticide and microbial pesticide income and profit margin both increased 9.4%. However, small enterprises that were not running well suffered higher losses. From January to November, the number of companies and amount of loss of Chinese bio-pesticide and microbial pesticide enterprises both increased, especially the amount of loss doubled that of 2014, which is 127.3 times of the loss of 2014, being probably attributable to the higher technical barrier and more centralized product of the bio-pesticide industry.
* AgroPages “China Agrochemical Market Monthly Report” is published by Agropages in the beginning of each month, providing fresh news in last month of China Agro-related market, including Agrochemical Industry Dynamics, Agriculture Events, Agrochemical Company Dynamics, Agrochemical Product Dynamics and Regulations & Policies Updates, to provide assistance in exploring the investment and business opportunities in China.
Please reach Terry at email terry@agropages.com to get a sample.
Source: AgroNews
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