Can glyphosate experience help glufosinate find a way out?

As a key production input to modern agriculture, herbicide is a typical reflection of the changes in the global agrochemical industry. 

Since the birth of glyphosate, paraquat, glufosinate, and diquat in the mid-to-late 20th century, which are the four major burndown herbicides, the global agricultural production pattern has had a deep impact. However, in recent years, the herbicide industry has faced many challenges: The paraquat ban, glyphosate carcinogenic controversy, and the glufosinate substitution trending having become a focus of attention in the herbicide market. 

This article uses the typical cases of glyphosate and glufosinate to discuss the development of major herbicides, sharing some personal perspectives on the drivers of the industry transition and future development trends.

The glyphosate industry chain is now already a complete industry chain, where the industry chain of leading enterprises has covered phosphate mining, intermediate production, technical material synthesis, formulation processing, and overseas product registration. In the current chemical market cycle, glyphosate prices have declined but remain stable without price collapse. 

In terms of glufosinate, there is yet to be a single leading enterprise that can form a complete industry chain covering upstream production, global registration, and market deployment. The market entry of the Chinese enterprises Chengxin and NHU, along with the market promotion of L-glufosinate, is expected to accelerate the process of restructuring the glufosinate market.

The domestic price of glufosinate fell from RMB70,000 yuan per ton at the beginning of the year to RMB53,500 yuan per ton at the end of June, a decrease of 23.57%, which once even fell to the lowest point in 10 years. On the other side, the price of glyphosate this year dropped from RMB30,000 yuan per ton to RMB24,500 yuan per ton, currently at RMB25,500 yuan per ton. However, the price fall of glyphosate is gradual and steady. 

The changes in the price of glyphosate and glufosinate from 2023 to date (unit: RMB10,000 yuan per ton)

01  Glyphosate: From inception to the formation of a stable industrial structure 

Since its first introduction to the market in 1972 by Monsanto (now acquired by Bayer), glyphosate has quickly grown into the world’s best-selling herbicide due to its broad-spectrum, high efficiency, and low toxicity properties. Its development history comprises roughly the following stages:

1982-1990: The early stage of development, where production technology was on the low side and the output was small but increased from 100-ton level to 1,000-ton level.

1991-1994: The rapid growth stage, with output breaking through 10,000 tons.

1995-2005: With the promotion of GM crops, the output increased rapidly to 100,000 tons but it was faced with international trade friction as in the anti-dumping claims.

2006-2014: Due to Monsanto’s plant shutdown, Chinese companies entered the glyphosate market, having jumped to the position of glyphosate’s largest producer and supplier. Of course, the cruel expansion of capacity has led to excess capacity.

2015-2019: The glyphosate industry was subjected to consolidation, where outdated capacity was phased out, driven by the promotion of supply-side reform and environmental compliance regulation.

Since 2020, the glyphosate industry has moved into its stable and mature stage, with production capacity stabilized at around 800,000 tons and the number of manufacturers reduced to about 10, which makes it a balanced supply and demand structure but still slightly fluctuating with the changes in the market. At this stage, several leading enterprises have established a complete industry chain, from phosphate mining, intermediate production, synthesis of technical materials, formulation processing, and overseas product registration. This vertical integration mode not only improves the manufacturer’s ability to control cost but also enhances the anti-risk capability at the time of market fluctuation.

At present, China has become the world’s most extensive production base and exporter of glyphosate, accounting for about 80% of the global supply. In contrast, Bayer still maintains a 25% market share of the product variety, as backed up by its advantages of global industry layout and the tie-in sale of GM seeds. In the short run, this business mode can remain stable. This is one of the essential reasons for the gradual and steady price fall of glyphosate in the present market cycle without price collapse, although the price has been constantly declining. Of course, if the present market cycle has not touched the bottom, the downward trend of the cost of glyphosate will continue.

02  Glufosinate: Plant shutdown, with imbalanced supply and demand

Glufosinate was chemically synthesized and launched by Hoechst AG (now BASF) in Germany in 1986. Later, with the promoted global ban on paraquat and glyphosate and the increased market penetration of GM crops, the glufosinate market could maintain a growth trend. As prime manufacturers are actively expanding production, the global glufosinate production capacity has increased significantly from 4,800 tons in 2011 to more than 40,000 tons in 2020.

The production capacity of glufosinate is increasing hugely, leading to an imbalance between supply and demand. According to statistics, after BASF’s shutdown of nominal production capacity, the glufosinate capacity is 160,000 tons (including UPL’s 10,000-ton capacity in India), while the actual global demand is 55,000-60,000 tons. At this stage, the glufosinate market shows the following trends: Vicious competition, low industry concentration, competition from L-glufosinate, and an incomplete industrial chain.

Fierce competition exists between conventional pesticide manufacturers and newcomers such as Chengxin and NHU, who are using their advantages of the chemical industry chain and the business of scale, which adversely impact conventional enterprises, intensifying market competition. There is a big difference between the process design of the conventional pesticidal fine chemical industry and the large chemical manufacturing. In addition, although the industry layout of conventional manufacture is relatively earlier and more complete, the registration certificate of major pesticides is not rare and is not a big advantage in the long run.

The industrial chain is not complete. Compared with glyphosate, glufosinate is of lower industry integration. From the upstream technical material, to the downstream formulation processing, and overseas market development, not a single enterprise has formed a complete industrial chain yet.

Market exit cost is high, and industry concentration is low. The capacity of glufosinate requires huge investment, and termination of operation is difficult once it is in production. As a result, it is difficult for manufacturers to readily exit the market, even at the cost of losses. Therefore, the complexion of ″difficult exit and difficult entry″ may intensify the vicious competition within the industry.

The global market landscape is changing. While the U.S. registration of L-glufosinate is about to begin, Brazil is expected to start granting registration of L-glufosinate in the coming years. Multinational companies will turn to the deployment of production of L-glufosinate, which may make the recovery of glufosinate impossible. In China, the production capacity of L-glufosinate has been increasing rapidly, with a built capacity of 38,500 tons at present and a planned capacity of up to 350,000 tons. This competition dynamics may reshape the global glufosinate market. To this end, as an age-old multinational company, in the last five years, BASF has successfully closed three glufosinate plants, respectively in the United States and Germany to exit the chaotic competition. This may be a better industry consideration and a wise global view.

As affected by the above, the price of glufosinate has fallen drastically and fluctuated at the bottom for a long time. In the first half of 2024, the domestic glufosinate market continued its downward trend, falling from RMB70,000 yuan per ton at the beginning of the year to RMB53,500 yuan per ton at the end of June, a decrease of 23.57%. Today, the price is down 85.5% over the high point in 2021, at the lowest level in the past ten years. 

03  Development history of major herbicides

By comparing the development history of glyphosate and glufosinate, we can make a summary of the typical development trajectory of major herbicides as follows:

1. Technical breakthrough period: Novel product successfully developed and commercialized.

   
   

2. Market introduction period: Small-lot production, gradually cultivating market demand.

   
   

3. Rapid growth period: Product superiority is recognized by the market, which drives a rapid increase in demand and extension of production capacity. In addition, the launch of GM crops has promoted the expansion of production capacity. Taking glyphosate as an example, in 1996, Monsanto launched glyphosate-resistant GM crops, which significantly increased the market demand and application of glyphosate, facilitating the product’s explosive growth.

   
   

4. Overcapacity period: Many companies blindly expanded production, resulting in an imbalance between supply and demand, while prices fluctuated sharply.

   
   

5. Industry integration period: Through market competition and policy guidance, outdated production capacity was phased out, and industry concentration was improved. 

   
   

6. Mature and stable period: Supply and demand are balanced; industry leaders form a complete industry chain and build up a strong anti-risk capability.

04  Thoughts on the development of glufosinate

Based on the above analysis, the following questions are forwarded for consideration in the future development of glufosinate:

1. De-capacity: In the face of the current serious problem of overcapacity, how can the glufosinate industry solve the problem in an orderly manner? Will an industry consolidation model arise like for glyphosate? 

   
   

2. Technical innovation direction: In the context of L-glufosinate gradually becoming the focus of attention among the industry, how should glufosinate companies determine the direction of research and development? Should more investment be made in L-glufosinate?

   
   

3. Industry chain integration: How can the vertical integration of the glufosinate industry chain be promoted to improve the competitiveness and anti-risk capability of enterprises?

   
   

4. International market development: In the circumstance of global agrochemical giants adjusting the glufosinate business strategy, how will Chinese enterprises seize the opportunity to accelerate the international market deployment?

   
   

5. Sustainable development: How to balance the relationship between capacity expansion and environmental protection to promote the green and sustainable development of the glufosinate industry?

   
   

6. Policy implication: What impacts environmental policy and safety regulation may bring to the glufosinate industry going forward? How can companies respond in advance?

   
   

7. Industry collaboration: In the fierce market competition, is it possible for glufosinate manufacturers to avoid vicious competition and achieve healthy industry development through any form of collaboration?

Conclusion

The development of major herbicides reflects the overall change in the agrochemical industry. From the successful experience of glyphosate and the current challenges to glufosinate, we can see that multiple factors, such as technical innovation, market demand, industrial policy, and environmental regulation, influence the development pattern of the glufosinate industry. In the future, the major herbicide market is expected to move into a more mature and rational stage of development with the deepening of the industry chain integration, technical innovation, and global operation. For agrochemical enterprises, accurately seizing opportunities and positively responding to market change will be the key to gaining an advantage in the competition in the years ahead.

For a detailed report on L-glufosinate, please contact AnnieFeng@agropages.com