Uncertainty Rules China’s Agchem Market Outlook – Rabobank
A stalemate in China’s agrichemical market is expected this year, as rising raw material costs drive up active ingredient costs, but low agricultural product prices boost downstream demand, according to a new Rabobank report.
“With tightening (Chinese) policy, increasing pressure on environmental protection, and intensifying competition, the agrichemical industry is entering a critical period of transformation, from high-speed development to high-quality development,” Rabobank’s China Food and Agribusiness Monthly report states, continuing:
“We are more likely to see transformation, upgrading, M&A and reorganization. The market has shifted from providing simple products to providing value-added services for farmers to enhance core competitiveness, which has become an important growth point for agrichemical enterprises.”
Looking at the bigger picture, China’s economy is slowing down. Two key questions loom, says Michael Every, Rabobank Head of Financial Markets Research, Asia-Pacific.
The first question revolves around a major stimulus package to revive growth, which will only worsen the country’s debt problems, and lead to weakening of the currency and short-term growth. Measures to prop up the economy are already happening, and more stimulus measures are all but certain, according to CNN.
The country’s official growth rate is expected to be around 6.5% for 2018, the weakest in nearly three decades, and to drop closer to 6% this year.
“But many analysts are skeptical about the accuracy of the government figures and say growth may be significantly lower in reality,” a CNN article said.
The U.S.-China trade war is the other question. Every explains that disruptions in Chinese exports are at significant risk in 2019, and U.S. tariff action is “already encouraging a shift in investment out of China and into ASEAN and India, something that further reduces the Chinese economy’s long-run growth potential.”