China: Impacts of great environmental pressure and tight raw material supply on glyphosate

 

As a follow-up, Shijiazhuang municipal government, district/county government and the cyclic chemical industrial park administrations have all received the Shijiazhuang Air Pollution Control Decree. The Decree says that since September, Shijiazhuang has experienced many heavily polluted days, going further down on the list of China’s 71 key cities, and it has now become difficult to accomplish the yearly objective of 10% PM2.5 reduction. The Decree requests that, according to the Shijiazhuang Pollution Control Action Plan and the requirement of the municipal government, measures must be taken to control and regulate the production activities of industries of Shijiazhuang, including industries of pharmaceutical, cement, casting, steel, coal, electric power, coking, as well as boiler running facilities. The Decree has included strong actions to be taken for each of the above industrial sector for the purpose of prevention and control of pollution. Pharmaceutical factories are not an exception; all pharmaceutical factories are requested to shut down their operation. The implementation of the actions required by the Decree shall begin from November 17 and end on December 31, 2016.

 

As far as China’s current glyphosate production process is concerned, 70% capacity is based on glycine process. Hebei province, including Shijiazhuang, is the most important production location of the main raw materials for the glycine-based production process, which are glycine and paraformaldehyde, accounting for 50% and 60%, respectively. According to reliable sources, due to this round of campaign of control, Hebei’s two most important glycine vendors Donghua Jinlong (90,000 tons) and Donghua Jiheng (90,000 tons) have shut down production. It is expected that a glycine capacity of 200,000 tons will be suspended or reduced within the coming week. At present, the daily glycine supply capacity is reduced dramatically down to 530 tons. In Shandong province, glycine supply is also affected by environmental compliance requirement, and supply capacity is further reduced. Compared to the daily supply of 1,500 – 1,600/ton in the past, now the supply in the province has decreased by 65%. Glycine price has already risen by 20%, which is expected to continue even after reaching 11,000-12,000 yuan/ton.

 

Paraformaldehyde is also under the pressure of price rise. China’s prime paraformaldehyde vendor Hebei Jintaida (50,000 tons) and Hebei Yuhang (50,000 tons) have both shut down production. With the first snow in Hebei province, transportation is affected. The paraformaldehyde price of 5,500 yuan/ton can hardly be maintained, which is expected to rise by 10%-20% within the coming week.

 

Good time for glyphosate will come earlier 
 

Glyphosate industry structure has tend to be more rational since the environmental inspection conducted this year. Good glyphosate vendors, including industry leaders such as Sichuan Fuhua, Hubei Taisheng, Yangnong Chemicals, Jiangshan Agrochemicals and Wynca, will benefit from the price rise in the winter of 2016. Glyphosate price is expected to rise by 20%-30% in the week ahead and might get back to the price of 30,000 yuan/ton at one time.