After a long period of declining glyphosate prices in China, the current season is strengthening confidence for a rebound. The main factors can be found in rising prices of raw materials like glycine and paraformaldehyde and increasing downstream demand. This is what traders and buyers can expect.
In the middle of November, the ex-works prices of glyphosate TC and glyphosate formulations experienced another rise compared to the last month. The price itself is remaining at a low level compared to previous years, but the continuous price rise shows the trend back up. The price of glyphosate technical started to rise in August 2016 and is suspected to continue to rise in December, according to CCM’s analysts.
The main reason for the recently steady growth and the expected increasing trend is the higher price of the raw materials including glycine and paraformaldehyde. The prices are rising due to production cuts by governmental orders and supply difficulties in China’s north, which has experienced heavy snows. In fact, 70% of glyphosate production is based on the glycine process, which requires glycine and paraformaldehyde. Glycine prices experienced a month-on-month fall from January to September 2016. Only recently in November the price climbed sharply on a 22.45% MoM basis.
The Hebei Province in China is the most important region for glycine and paraformaldehyde producers, with the biggest accounting for more than half of China’s national total output. This province is also affected by huge pollution problems. As a result, the Ministry of Environmental Protection ordered that the production of several industry sectors must be cut down. These implementations will prospectively end on 31 Dec. 2016. Therefore, many producers of glycine and paraformaldehyde have reduced their operating rate, which in turn increases the prices due to lower supply and shortage. The leading glycine producers in China, Shijiazhuang Donhua Jiniong, and Linyi Hongtai, already increased their prices for glycine, which represents an ongoing trend, according to CCM.
The winter in China has two main effects on the glyphosate price. First of all, winter is known to be the storage peak season for glyphosate, while many manufacturers only have small inventories. This higher demand in building storage is driving prices upwards. Another impact is the heavy snowfall in northern China. The snow causes difficulties in transportation, which also leads to a shortage of raw materials and therefore higher prices of upstream and downstream products. Paraformaldehyde is especially affected by this. China’s leading suppliers of paraformaldehyde, Hebei Jin Taida and Hebei Aerospace, both with an output of about 50,000 tons, had to cut down production completely due to the region’s logistics and transportation being blocked.
Other upstream products of glyphosate, such as yellow phosphorus and methyl alcohol, raised prices up to 30% because of increased coke prices in November, which are traditionally caused by the heating season in China’s cold north. Coke prices are up by 200% compared to early 2016, leading to higher prices of raw materials in China in general.
Who will be the beneficiaries of the rising glyphosate prices? Higher prices are favoring the vendors and industry leaders, such as Sichuan Fuhua, Hubai Taisheng, and Yangnong Chemicals. Attributing to multiple factors, it can be expected that the price is going to rise by about 20% to 30% within a short timeframe.
What’s more, in mid-October, the 2016 AgriChemEx was held in Shanghai, with all the main Chinese pesticide manufacturers as exhibitors. What was surprising was that not one manufacturer did a price quotation at the exhibition, according to CCM. In the beginning of November, several companies have already raised the quotations, which led to a stable market for glyphosate. The increasing demand of the northern hemisphere that is taking place right now, will likely affect more price rises of glyphosate TC and formulations in the near future.
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