Ya que Farm Chemicals International published its country report on China (“Cleaner, Leaner, and Greener,” June 2007), many of the forecasts we discussed about China’s near future have now come to pass. At the time, the industry was just beginning to address the increased environmental standards being introduced by the Chinese government. It was even noted that if the Chinese manufacturing industry were to go through such a quick and dramatic shake-up to conform to the new standards, the entire world would feel the effect of tightened raw material supplies.
But knowing that didn’t prepare us for what was to come. Supplies have indeed shrunk, and prices have reacted accordingly. Even highly competitive products which had been reduced to hair-thin margins — glyphosate being the stand-out example — suddenly saw values double, triple, or quadruple in different areas of the world.
Part of the price increase came from raw material price hikes, and part came from increased demand, as global crop prices improved and crop areas expanded. The companies that are producing high-demand products such as glyphosate certainly have no shortage of buyers, leading many companies in China and elsewhere to take a hard look at increasing production or investing to get their plants compliant with the country’s new standards and cash in on the swelling ag-chem market. At the same time, there is doubt: many insiders are uncertain about the Chinese government’s motives behind the new environmental policies. In early 2008, FCI visited one Indian supplier in Mumbai and discussed the high demand for glyphosate. When asked if he thought it would be a long-term trend, he shrugged and said, “It may be long-term. It may also end around August 25.”
The date referred to the 2008 Summer Olympic Games, to be held in Beijing from August 8 to August 24. After that, he suggested, there was no way to tell. Was China’s obsession with cleaning its industrial sector, improving the environment, and modernizing its production base an attempt to put its best foot forward in the international spotlight? If so, what would happen when the world’s eyes turned away — would the stringent policies remain in place, or would the power switch be thrown back on in the world’s largest manufacturing center?
Después de los juegos
While global attention might have been an impetus to accelerate the country’s environmental and industrial reformation, it is not the sole driver. China wants its chemical industry to improve, to modernize, and to cast off its reputation as a low-cost/low-margin producer. It aims to be on par with other high-quality global suppliers, and is taking large strides in that direction.
En la Conferencia CAC celebrada en marzo en Shanghai, Zhao Qiuyue del Administración Estatal de Protección Ambiental de China (SEPA), spelled out the government’s main causes for concern.
“We saw problems in the water quality of 27 State-controlled lakes and reservoirs,” she said. “Waste water pollution flowed into the Yangtze, with 300 types of pesticides detected.”
That drove SEPA into action. “China has cancelled the export rebate, levied an environmental tax, and set water rules,” she noted. “In 2006, for drinking water quality there were 35 items in the regulations. Now there are over 60 rules. For pesticides, the rules increased from 10 to 21.”
In fact, the environmental crackdown is likely to continue rather than back off. “Waste treatment is a big issue at plants still. We need more control,” Zhao said. “We need GMP (Good Manufacturing Practice) certification as a policy. We need scientific, specific environmental indices. And we need to limit hazardous materials, to set the same standards for imports and exports, for big and small companies, for every situation.”
Una puerta cerrada, una puerta abierta
Las empresas que esperan un rápido regreso a la normalidad pueden encontrar sus plantas cerradas para siempre, dicen varios conocedores chinos. Sin embargo, con los precios altos y la escasez de productos clave frente a la creciente demanda, muchas empresas también confían en que sus inversiones en instalaciones modernas y tecnología ambiental mejorada proporcionarán rendimientos más que adecuados.
Soh Kinn Yeow, director de Malasia Kenso Corp., said that his company’s plans to expand its production base in China were unaffected by the new regulations. In fact, Yeow said, China’s efforts to become a more developed industry will be a long-term boost for input suppliers that remain in the game.
“We believe in the environmental rules. Our new plant has waste water treatment and other environmentally friendly technologies,” he said. “China is creating an environment where responsible and committed companies can build the industry.”
While stricter rules add expense to a operating costs, they also promote the companies devoted to quality production, Yeow continues. “We believe in the future, only the companies which are environmentally responsible will survive.”
Otras empresas que trabajan en China comparten claramente esa filosofía: se espera que para el próximo año, al menos una docena de nuevas plantas o ampliaciones y mejoras a las plantas se completen en todo el país, y más en las primeras etapas de construcción.
Otra avenida
El futuro de las agroquímicas chinas también tiene el potencial de trazar un nuevo rumbo. Junto con la mejora de la producción, existe una ambición creciente para mejorar los productos y la experiencia en registro, y evolucionar más allá de los proveedores de materias primas puras.
Summarizing the opportunities for such a movement, Dr. Guangming Ma of the US Environmental Protection Agency (EPA) and former expert for ICAMA described what he called China’s “embarrassment” — its glyphosate situation.
“China exports glyphosate tech., and imports formulations — and is No. 1 in the world in both,” Ma said. “China often can’t sell to the US, so they sell to US companies, which then finish the product and sell it at a higher price. China makes the product cheaply and then buys it back at a mark-up,” Ma explained, adding that making the finished product itself is not difficult.
What is required, Ma said, is for Chinese companies to invest in the ability to enter the US and other markets directly. Currently, Chinese companies typically only have EPA Origin registrations, which are more easily attained but do not allow them to sell directly in the US. Instead, they sell to companies with full EPA registrations, and since Chinese manufacturers must compete for these companies’ business, the value all comes at the sale of the finished product.
Sin embargo, Ma cree que en el futuro, las empresas chinas inteligentes comenzarán a obtener registros de pesticidas de la EPA como socios o por su cuenta.
“Some companies know little about the US ‘me-too’ registration process, are unwilling to pay the data fees for registration, misunderstand the difference in registration types, or worry about offending the ‘middleman’ companies that they currently rely on,” Ma said.
Pero al centrarse en la modernización y comprender las reglas del juego, el potencial de las empresas chinas que construyen marcas chinas en los EE. UU. Y otros mercados es abrumador y, cree Ma, posiblemente a la vuelta de la esquina.
With China’s reinvention already underway, it would not be a surprise to see that vision fulfilled.