Forecast: Chinese 2,4-D TC Exports to Increase 45% in 2015

China’s exports of 2,4-D technical (TC) are rising fast in 2015, driven by Weifang Rainbow’s ambitious expansion plans, beneficial exchange rates and tax cuts, and a general improvement in Chinese manufacturers’ production technology, according to analysts CCM.

China already exported 23,916 tonnes of 2,4-D TC between January and July this year, according to data from China Customs and CCM, almost as much as the 27,115 tonnes exported over the whole of 2014.

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The upturn is being driven entirely by a huge 216% year-on-year leap in exports of 98% 2,4-D TC. This high-concentration product accounted for just 30% of China’s total 2,4-D TC exports last year, but this year has overtaken the lower-grade 96% 2,4-D TC to become the most popular technical among foreign buyers, accounting for 54% of total 2,4-D technical exports during the first seven months of 2015. Exports of 96% 2,4-D TC actually declined 13% year on year during the same period.

Why China’s 2,4-D TC exports are growing so quickly

A number of factors are combining to benefit Chinese exporters in 2015, including rising overseas demand for 2,4-D, a favorable RMB-USD exchange rate, an increase in export rebates, and the aggressive strategies of leading Chinese producers such as Weifang Rainbow.

Weifang Rainbow’s expansion plans

One of the biggest changes this year has been the surge in exports from Weifang Rainbow Chemical Co., Ltd. (Weifang Rainbow), whose exports of 2,4-D TC are up 147% year on year. So far this year, the company has provided 42% of China’s total 2,4-D technical exports by itself.

Another notable statistic is that 9,817 tonnes of the 10,049 tonnes of 2,4-D technical that Weifang Rainbow has exported in 2015 has been the high-grade 98% 2,4-D TC variety, a 317% increase over the same period last year.

Compared to other Chinese producers, Weifang Rainbow places more emphasis on exports, which explains its much more impressive performance in the international market.

The company has obtained over 1,300 pesticide registrations in 37 countries across South America, Asia-Pacific, Africa, and Eastern Europe, according to the company website, and is now beginning to gain a greater foothold in overseas markets through acquisitions.

In 2014, Weifang Rainbow bought up a formulation processing factory in Panama to help it meet rising demand from Central America, the Caribbean and the Andean states, and this year the company acquired the Green Crop Company, an Argentinian agrochemicals producer with over 20 self-owned brands, to help it further expand its presence in the South American market.

Weifang Rainbow also owns a Buenos Aires-based formulation manufacturer, Dicopack, which it acquired in 2013.

“After improving its marketing channels significantly in 2015, Weifang Rainbow not only supplies 2,4-D TC to customers, but also exports 2,4-D TC to overseas subsidiaries for formulation processing,” commented Chen Zaoqun, Editor of Herbicide China News.

“The acquisition of the Green Crop Company also explains why Argentina has become the top export destination for Chinese 2,4-D TC this year,” Chen added.

China mainly exports 2,4-D TC to Argentina, Brazil, Russia, Indonesia and the US, which make up a combined 64% of total exports by volume. Chinese exports to Argentina have risen 157% year on year and account for 35% of the total.

Falling prices

Weifang Rainbow and other Chinese exporters are also finding it easier to sell large quantities of high-quality technical this year thanks to a series of price factors that are helping to make Chinese pesticides more competitive.

The average export price of 98% 2,4-D TC in 2015 has been USD2.73/kg, 12% lower than last year, while the average export price for 96% 2,4-D TC is down 2% year on year.

Chinese traders are more willing to accept lower prices this year following China’s increase of its export tax rebate on pesticides from 9% to 13%, which came into effect at the start of 2015. This is making Chinese 2,4-D more competitive in the international market, while also making it more profitable for Chinese producers to export rather than selling their products domestically due to the lack of subsidies for domestic sales.

The recent devaluation of the RMB has also benefited Chinese exporters, according to Mao Linbo, Purchaser at Shanghai Xiangyuan Chemicals Co., Ltd.:

“The devaluation has definitely been good news for Chinese pesticide traders,” said Mao. “As foreign trades are often settled in U.S. dollars, the RMB devaluation helps Chinese exporters. For small traders that settle trades immediately, they can make direct gains from the devaluation.

“As for larger enterprises with bigger export volumes, they will carry out long-term exchange settlements and sales with banks in advance without locking the exchange rate to prevent any losses caused by a currency devaluation. In the short term, the RMB devaluation may play an active role in increasing the number of orders these pesticide enterprises receive,” he added.

Improving production technology among Chinese manufacturers is also playing a role, according to Chen:

“As 2,4-D formulation manufacturing techniques improve among Chinese companies, it’s easier for them to produce 98% 2,4-D formulations under fixed costs during the production,” said Chen. “It’s another reason why the price of 98% 2,4-D TC has declined a lot compared to last year.”

“High-concentration technical is always popular with foreign traders because it is much easier to produce high-quality formulations with high-concentration technical. With export prices falling, purchasers prefer to purchase high-concentration technical, which is why 98% TC is so popular this year,” Chen added.

Bright prospects

With Chinese exporters likely to continue feeling the benefit of these background factors for the rest of the year, China’s 2,4-D TC exports will continue growing throughout H2 2015. CCM forecasts that exports will increase 45% year on year overall in 2015.

Looking further ahead, there are also signs that demand for Chinese 2,4-D will continue rising further. Many pesticide industry insiders predict a bright future for mixed formulations of 2,4-D and glyphosate as resistance to glyphosate increases, while the USDA’s deregulation of Dow AgroSciences’ Enlist Weed Control System also offers possibilities to Chinese 2,4-D producers.