2021 Global Agrochemical Supply Chain Watch

Date:03-02-2022

Editor's Note: In 2021, the global economy went across its second year of the outbreak of COVID-19, having moved gradually onto the track of recovery and growth. Nevertheless, due to the reemergence of COVID-19 and the growing inflationary pressure, the economic recovery momentum could not sustain itself and slowed down. 

The container shortage and the insufficiency of port operations triggered by the pandemic posed tremendous pressure on global logistics, resulting in the higher cost of shipping services.

On the production side, as the world’s leading producer of active pesticide ingredients, China set an ambitious goal of achieving carbon peaking by 2030 and carbon neutrality by 2060, an action to combat climate change and protect biodiversity. To this end, in the second half of 2021, the Chinese central government issued an order to all provinces requesting measures to be taken to control the Total Energy Consumption and Energy Intensity. In this circumstance, chemical productions in China slowed down, with a sharp rise in the cost of raw materials and destruction of the supply chain of intermediates leading to surging prices of part of pesticide technical. This caused a certain degree of panic within the industry. 

This article presents the dialogues with various business entities in the agrochemical supply chain, including pesticide companies and multinational companies in South America and North America, and Chinese manufacturers. The challenges they experienced in the past year reflect the changes in the market. At the same time, all industry players engaged in product development, production and trading have made strategic adjustments to be ready for the inevitable happening of future events and more uncertainties. 

Terminal Market: Product shortage occurs frequently, risk management becoming a top priority

Brazil is China’s largest pesticide export destination, where 20% of the country’s import pesticides are supplied from China. According to Sindiveg data forecast, net sales in the Brazilian agrochemical market were expected to reach US$13.3 billion in 2021. However, due to China’s limited supply of major herbicides such as glyphosate, diquat and glufosinate, the pesticide import value in Brazil in 2020 was US$6.2 billion, down 10.1% year on year. 

According to the report of João Carlos Gonçales, procurement manager of Brazil’s agricultural cooperative CCAB By InVivo, presented at the AgroPages 2021CPEW in Sep， the price and import volume of glyphosate TC and WG fluctuated considerably in the year. The volume import of glyphosate TC is essentially the same as 2020, whilst the price was almost three times higher than that of the previous year. The import volume of glyphosate WG decreased by ⅓ over 2020, whilst its price increased at an even higher rate than that of glyphosate TC. 

This phenomenon put immense pressure on importers, who entered into a purchase contract with Brazilian farmers already in the first quarter of the year. In such a situation, when prices of raw materials and products were constantly rising, suppliers asked for the renegotiation of pricing, as purchase orders could even be cancelled. These happenings squeezed the profit margin of importers, causing heavy losses to importers. 

At the terminal market, local pesticide importers were put under pressure and had to pass on the cost rise to dealers and farmers. Accordingly, Brazilian farmers had to pay more for pesticide purchases. Coupled with the uncertainty of the date of shipment, farmers lost confidence in the supply chain. Meanwhile, the short supply of glyphosate has forced farmers to seek other solutions. Hence, some alternative herbicides have been subjected inevitably to a price rise.

Brazil’s ban on paraquat invoked a strong demand for diquat, with its price rising rapidly. Keeping in mind the farm gate price, by July 2021, the price of diquat rose by 82%, which showed the strong demand for the product. Since Brazilian pesticide companies did not expect the ban on paraquat, the market space left by paraquat is quite large at this time. Moving into 2022, Brazil faces an extremely short supply of diquat. Also, the prime supplier Syngenta acknowledges difficulties in the supply of products that use diquat as an active substance. Leila Zorzetto, general manager of the local Brazilian company CHD’S, expressed to AgroPages that cancellation of diquat purchase orders happens very often in the local market, a driver to a further price rise. There was a suggestion that customers should start purchases immediately to secure the inventory and ensure a stable price. 

Farmers in the United States (US) also faced the price rise in fertilizers, chemicals and seeds. Prices in the fertilizer market at the end of 2021 soared to the price level in the years of the global financial crisis, resulting from the rise of energy costs in Europe and China. That agrochemicals play a vital role in the agricultural supply chain is well known. Among the crop protection chemical products used in the North American market, 70% of the active ingredients come from China. It also supplies 90% of the intermediates for the production of materials, which is high degree of dependence on the country. 

Besides the short supply and the price rise of glyphosate caused by the restraint of international shipping and phosphorous production in China, the shutdown of the plant of Bayer Crop Science in Louisiana in late August 2021 due to Hurricane Ada, contributed to the short supply of the major agrochemicals in the US. 

Up until the end of 2021, prices of the major products glyphosate and glufosinate hit a record high in the US. American farmers started to look for glyphosate substitution, which resulted in a shortage of 2,4-D and clethodim. In an interview, Jeff Tarsi, senior vice president of Nutrien Ag Solutions North America, said that the lack of agrochemical products would continue in 2022. With the tight supply of glyphosate, distributors have to look for alternatives. The group of distributors represented by Nutrien Ag Solutions is communicating with farms to make sure that business is conducted flexibly - to make the most of the glyphosate already in the hands of farmers for the most useful applications while thinking about the use of paraquat as a substitute for burndown herbicidal applications. Tarsi said that some older and off-patent ingredients are still effective in application, and farmers have not forgotten the application technique of these old products. 

The challenge faced by the entire EU region is the availability of products, which has two implications. The first refers to the review of the existing active ingredients following the EU regulatory framework, which will lead to fewer and fewer available ingredients; the second points to the worldwide restriction of pesticide production and disruption of the supply chain, which make it impossible to make delivery of the finished products on schedule. 

Wojciech Babski, Head of Business Unit Agro at CIECH Group, told AgroPages that the Polish crop protection market has been growing systematically in recent years, and the trend will continue in the years ahead. In mid-2021, the prices of crop protection products in the Polish market rose rapidly, whereas glyphosate price has risen three times so far. As a result, the price rise of active ingredients has been passed on to the end products and there are increased uncertainties between distribution channels and farmers. 

Users have begun to consider postponing the use of glyphosate, or have considered using other solutions. CIECH is currently in close contact with suppliers to obtain the latest market information in a timely manner and is actively locating new suppliers to mitigate the risk of supply. Moreover, CIECH is endeavoring to innovate, hoping to launch a landmark glyphosate product in 2022, which can reduce the use of the active ingredients by 50%. Babski believes that while the glyphosate technical and formulation prices continue to stay high, the new product will use only half of the active ingredients, which gives CIECH greater flexibility in production and pricing. 

The procurement manager of an African agrochemical company said to AgroPages that 96% of their supplies come from China. In the past year, they tried hard to secure the unit price of raw materials, but several contracts were still cancelled, including many key product varieties. Speaking of the 2022 procurement plan, the procurement manager said that the current stocks plus the purchase orders had been honored and shipped, and the products for the first quarter of 2022 are secured with the essential products being re-priced according to the inflation rate. In future procurements, the company will consider leveraging material supplies from China and other markets to prevent the risk of supply shortages.

China’s Procurement and Manufacturing: Strategic adjustment, transformation and upgrading

Top-level multinationals felt some tension in the early years and have made necessary adjustments to the supply chain. At the 2021CPEW, the Chinese market procurement executives of Syngenta and Corteva addressed the issue of strategic adjustment of procurement. A few years ago, Syngenta launched a carbon reduction campaign with its suppliers. They used the mechanism of multinational companies to help suppliers screen products, techniques and processes, such as joint checking of specific values associated with carbon emission and determining the critical carbon emission source in the production process. 

Corteva has a complete supplier selection mechanism and evaluation system, capable of checking and tracking the whole supply chain, beginning at the most upstream raw material, followed by a full analysis of the entire supply chain and implementing a comprehensive risk-control procedure. In the meantime, considering the changing external environment, Corteva has made adjustments to its supplier selection criteria and has ended the exclusive supply mode. Instead, they brought in suppliers from different countries.

Germany’s asset-light Biesterfeld is more attentive to the medium-term and short-term supply chain operation, having incorporated the act of government in its market evaluation, which is an aid to the decision-making process to ensure a more secure supply. 

The 2021 carbon-peaking and carbon-neutrality initiative is only a beginning on the production side. For Chinese pesticide manufacturers, 2022 will put them under a strict test, as the future regulation will become more stringent and meticulous requiring agrochemical enterprises to continuously improve the production process, with a higher technical level and the criterion being implemented. Positive examples of improvement have been noted among Chinese pesticide manufacturers aware of energy conservation and energy consumption reduction. These companies have been continuously improving to the energy-use efficiency and quality of business operations. Enterprises ought to turn this challenge into an opportunity to make constant improvements. Rationally, it is a process of putting value back to the product itself. 

Yangnong Chemical - Production system established proactively in support of carbon reduction

Jiangsu Yangnong Chemical Co., Ltd, one of China’s agrochemical industry leaders, embraces a forward-looking vision to deploy a cleaner, more continuous and smarter production. Focusing on clean and intrinsic

safe process development during 2008 to 2012, the company pooled all its R&D resources, even suspended new product development. Such technical achievements have been embedded into subsequent projects, which paves the way to green growth. Thanks to emphasis on safe, environmental protection and green belief, Yangnong is not hit by stringent safety regulations and environmental compliance inspections in chemical industrial parks, instead, the company blazes a trail for

progressing.

Yangnong is a pursuer for safe production. In 2016, the company introduced DuPont’s safety management system, which was later re-innovated and integrated into company systems based on long-year practices, thus forming a safety management culture with Yangnong characteristics. For example, in Phase II of the dicamba project, the capacity soared from 5,000 tpa to 20,000 tpa, four times compared with Phase I while the number of operators of each shift increased only from seven to eleven. Such success lies in refined process steps, better automation and systematic engineering design.

Yangnong is a solver for waste treatment. The company enjoys advanced treatment techniques and top-notch equipments. Through internal research and external collaboration, Yangnong was the first in the agrochemical industry to achieve life cycle management of chemicals: 1) Leading high-concentration effluent treatment technologies and equipments in China ensure effluent to be treated up to requirement; 2) Cutting-edge German off-gas incineration systems boast a treatment efficiency as high as 99.8%, realizing a clean emission; 3) Hazardous wastes incineration facilities fulfilling EU 2000 standard.

Yangnong is an innovator for green products. Facing to the challenge from dual control of energy consumption, carbon peaking and carbon neutrality policy, the company is committed to creating new pesticides with wide spectrum, high activity and low toxicity. For example, the activity of innovative pyrethroid insecticide meperfluthrin is 15 times higher than that of allethrin. Its high activity reduces dosage, leading to a considerable plummet in raw materials consumption. This is a greater contribution to energy conservation and emission reduction.

Yangnong is one of pioneers for green process. The company masters bio-separation and ester synthesis by aqueous phase method, which are key technologies in the industry. To be specific, the company created bio-enzyme technology and obtained key intermediates. Compared to traditional chemical separation, this new bio-separation sharply reduces process steps and facility numbers, beef up automation and cut labor intensity, thus boosting huge decrease in effluent and solid wastes.

Yangnong is devoted to formulation research and innovation. By targeted precision application, the company reduces pesticide dosage and enhances efficacy, so as to secure carbon reduction. The most noteworthy is the company has a seed treatment product Tengshou  (fenaminstrobin•difenoconazole•thiamethoxam 45% FS) ,which is effective in controlling aphid and banded sclerotial blight throughout the growing season of wheat. Meanwhile, Tengshou has excellent functions, including systemic activity protection and plant healthcare. SYP-9080 launched in 2014 and SYP-9625 in 2017 are typical innovative products in China. With small doses and long persistence, the two blockbusters are able to control lepidoptera pests and citrus red mite respectively, eliminating farmers’pain points. So far, Yangnong has established a complete formulation platform that encompasses recipe development, production and sale. Combining novel molecular with generics, the company is endeavor to deliver differentiated portfolio, build brand and penetrate market share.

Fuhua Tongda - To shape a vertically integrated cyclic industrial chain 

Fuhua Tongda, located in Leshan, Sichuan Province, utilizes its corporate resources to develop a vertical industrial chain that is recyclable and fully reutilized. Fuhua Tongda possesses an annual 150,000-ton glyphosate production capacity and rich mineral resources, including 80 million tons of phosphate ore reserves, 90 million tons of salt mines, 120,000-ton lead and zinc ore, and 450,000-ton fluorite mine. The company uses glyphosate as a manufacturing platform to produce up to a dozen of by-products through its vertically integrated cyclic industrial chain. With the efficient utilization and recycling of resources, a recycling chain covering carbon, chlorine, hydrogen, phosphorus and sodium is formed, where the utilization rate of phosphorus resources reaches 99.8%, while the utilization rate of chlorine resources reaches 99.99% or above. 

Glyphosate production generates a lot of waste liquid. Fuhua Tongda has developed a set of integrated technology referred to as “membrane treatment - catalytic wet oxidation - evaporative concentration and crystallization.” Through recycling of “phosphorus” and “salt” contained in the glyphosate mother liquor, a “phosphorus element” and “sodium chloride recovery” cyclic economy model is created in the glyphosate industry, which once and for all solves the mother liquid problem existing in the glyphosate industry for long years. 

This technology can maximize the recovery of phosphorus and allow for the use of the by-product sodium chloride as a chemical material in the electrolysis-based production process. In the meantime, the technology solves environmental problems such as heavy metal pollution and foul odor. Fuhua Tongda saves about US$15.82 million per year out of the phosphorus wastewater treatment; raw powder extraction brings about an economic benefit of US$6.33 million; the disodium hydrogen phosphate dodecahydrate, after treatment, generates an economic benefit of about US$14.24 million; and US$11.87 million is saved from the raw material use in production of glyphosate. These savings are of both environmental and economic benefit. 

Since 2015, Fuhua Tongda has begun investment in research and development of glufosinate, with good progress. The production process adopted by Fuhua is the Al-Strecker process. The company’s self-developed synthetic MDP approach allows for synthesizing methylphosphonous dichloride under average temperature and pressure conditions, with a mild reaction and at a low raw material cost. The process uses chloromethane, a glyphosate by-product, as raw material, for complexation of chloromethane, phosphorus trichloride and aluminum trichloride, which are then subjected to decomplexation in the presence of a catalyst, resulting in methylphosphonous dichloride, in which case chloromethane is digested internally while the product chain of the company is broadened. In the course of production, Fuhua Tongda has continuously improved and optimized the process which cuts production cost, increases work safety and reduces environmental risk. Accordingly, the process has reached the nationally and internationally advanced level. 

In terms of formulation research and innovation, Fuhua Tongda has continuously improved product quality and cooperated with leading international formulators such as Evonik, Kao and Dow in research and development of formulations aiming to improve quality and reduce dosage, which are contributing to the carbon reduction.

Hailir – A strategic move toward upstream of industrial chain 

As a Chinese pesticide leader that is making rapid investments in R&D, innovation and industrialization of technical achievements, Hailir has made a sound deployment in its advantageous pesticide technical production, having also practised very well in respect of innovation of formulation, reduction of pesticide use and increase of efficiency of use.

As far as the production process is concerned, Hailir is currently conducting a partial continuous run renovation to replace the intermittent reaction of 2-Chloro-5-(chloromethyl) pyridine, which is the intermediate of prothioconazole, acetamiprid and imidacloprid. Up to date, specific progress has been made. Technical renovation may soon be implemented in support of the safe and stable running of the production process and improvement of product quality. The implementation of the technical renovation is expected to effectively alleviate the labor intensity of employees, help achieve a continuous run, and substantially reduce energy consumption. 

Hailir adopts the pesticide technical business strategy that extends to the upstream of the industry, which will move closer to the primary chemical industry, where the capital barrier is more extensive than the technical barrier. The deployment in the more universal basic chemical industry, which involves bulk materials, is of great significance to the consolidation of the company’s industrial chain advantages in the production of pesticide technical. In 2020, Qingdao Hengning Biologicals, a subsidiary of Hailir Group, was founded. The production base is regarded as Hailir’s a new growth area in the next decade. The production base produces several upstream intermediates, as being backed up by the advanced equipment, continuous processing, automated run, clean workshop and the green design, which will lead the industry development in the coming ten years. The production base lays a solid foundation for Hailir’s sustainable development of pesticide technical and pharmaceutical intermediates in the future. 

On the pesticide application side, Hailir’s series of innovative formulations have been greatly improved in respect of the prevention and control effect and the safety of use, as being achieved through the application of new technologies, which can improve the efficacy of application and reduce carbon emission from applications. For example, the patented tetramycin.zhongshengmycin 2% SL can be applied using the “high-pressure ionic membrane” technique, which results in an apparent increase in efficiency and safety; in terms of mixture products, the problem of biopesticide flocculation is solved. The flumorph.cyazofamid 30% SC is an excellent fungicide, especially its formulations of good rainfastness and adhesivity. Its outstanding performance, safety and efficiency are better than traditional fungicides, and highly regarded. The application interval of both products doubles the interval of traditional applications, thus making farmers contribute to carbon reduction.  

Hebei Lansheng - Green chemical innovation prevailing through R&D and production 

Hebei Lansheng Biotechnology Co., Ltd has emerged and proliferated rapidly over recent years, being well known at home and abroad for its pesticide technical research and development capacity as well as product quality. Based upon the new technologies for application to pesticide technical productions, Lansheng adheres to its idea of Green Chemical Innovation, which is implemented throughout research, development and production. 

Lansheng’s core products include clethodim, spirotetramat, metribuzin, brassinolide and boscalid. For each product, there is a dedicated work team working on continuous optimization of product quality and production process. At present, the main products are all produced via full automation. Meanwhile, a partial continuous run has been achieved, resulting in a more stable production run which becomes more regular and easier for the waste discharge management. In addition, through the operation of the energy management system and the initiative of building green factories, the company has improved the level of recycling and reclamation of resources effectively, which has played an active role in promoting the intelligent and green development of pesticide technical production. 

Lansheng believes that in the current era, the pesticide manufacturers ought to pay close attention to the adjustment of the corporate governance structure to adapt to the high-quality industry development requirement, such that enterprises can expect a promising future. To this end, Lansheng set up its Lansheng Group Energy Center to work on energy saving and consumption control measures via process innovation and equipment upgrading, aiming at the minimization of energy consumption. 

In terms of plant design and production arrangement, Lansheng referred to the applied technology of high energy-consuming steelworks and power plants, having tried various means to reduce energy consumption and emission. For example, the initial reaction vessels are designed to be placed in parallel, in which case a product item needs to be pumped from one vessel to the other. After an all-round and careful consideration, Lansheng changed the workshop layout into a longitudinal arrangement and changed the workshop in a plane arrangement to a three-dimensional structure, using the height difference to save the energy consumed by pumping. Also, the leak source is reduced for easier management. 

In constructing the plant area, the company is making a solar power testing covering 2,000-square meter rooftop. In the early stage, it is expected that daily power generation will reach 500 KWH; at a later stage, the solar power generation will be promoted to 100 mu of the plant area. If 5,000 KWH electric power can be generated per day, energy consumption of the plant will decrease enormously. 

Conclusion 

In 2022, out of the supply chain, the international shipping has eased and freight rate has somewhat declined, although quite limited. The domestic carbon peaking and carbon neutrality initiative will be implemented broadly and more specifically, which will change from a kind of campaign to normalized practice. Under the goal of carbon neutrality, the pesticide industry is faced constantly by competition and challenges. International buyers have begun to consider a change of source of procurement, but it cannot replace the people and industrial chain advantages of Chinese fine chemical industry in a short time. Other major producers, such as India, are also affected by the carbon neutrality, where the difference is that China is placed in a tighter and more urgent situation. 

Chinese enterprises should forget about any illusion or fantasies and pay complete attention to the overall impact brought by carbon neutrality; should continue to improve the energy efficiency; continuously improve the quality and efficiency of development; find breakthroughs, and embrace new opportunities in unique circumstances.