AgrochemEx: Mixed Fortunes For China’s Pesticide Industry In 2008
30 January 2009 Despite a heavy snow storm, violent earthquake, and post-Olympic influence, China’s pesticide industry remains thriving in the first 10 months of 2008. However, with the economic crisis influencing pesticide the industry gradually, the declining trend becomes more and more obvious.
Nanjing AgrochemEx 2008, held in October, saw the pesticide technicals market shift from a sellers’ market to a buyers’ market. China’s pesticide industry now meets its turning point after 10 years of rapid growth, and it seems very clear that industry restructuring and lower profits have come. We think the following reasons contributed to the present stagnant pesticide market:
1) A sudden snow storm reduced pesticide consumption. At the beginning of 2008, a sudden snow storm hit vast south China areas, leading to as much as 70% fewer pesticides applied in some provinces due to the slight insect occurrence. Meanwhile, traffic difficulties following the snow storm also depressed the pesticide market related to vegetables and fruits.
2) Government policies squeezed the profit space of the pesticide industry. Except for stricter environmental requirements, the transportation ban lasting for several months due to the Olympics posed another great challenge to the chemical industry. Plus higher registration fees, labor costs, and management expenses further squeezed profit margins of the pesticide industry.
3) Sharp change of the anticipation for biofuel caused great fluctuations in glyphosate prices. Since July, the price of glyphosate rose sharply to US $14,635 per ton. But it didn’t last long. A flash fallback of glyphosate price has occurred since October, dropping to $5,121. The lowest price hit $3,658, which is completely profitless for most companies. Rapid capacity expansion strengthened some enterprises, but the quick price failure bankrupted more companies than it helped.
4) Speed of economic crisis hurt China’s exports and the pesticide industry. The economic crisis depressed every industry in China, especially the exportation industry. Under this background, some export-oriented companies began to explore the domestic formulation market, which surely triggered price wars among domestic formulators.
5) Worry about the continuous price slump inhibits storage in low season. Pesticide enterprises usually store some products in the low season for the upcoming peak season. However, this phenomenon didn’t happen in this winter. Because of the uncertainty on raw materials and insect occurrence in the future, companies’ willingness to produce and store pesticides is quite low. A cautious attitude prevails in China’s pesticide industry at present.
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