编者按：特约撰稿人 David Li 在其月刊中简要介绍了当前中国农用化学品市场上主要除草剂、杀菌剂和杀虫剂的价格趋势，详见 中国价格指数. Below he also provides insight into how China’s agrochemical market is entering a new era of transparency between buyers and sellers while it faces the challenges of overcapacity.
根据发布的数据 中国农药工业协会（CCPIA）, China’s pesticide industry revenue (including export and domestic sales) decreased by 17% in 2023 compared to 2022. The total profit dropped by 62%, and export value decreased by 27%. ICAMA reported at the recent CAC会议 in Shanghai that China’s pesticide export value was USD $15 billion in 2023 with a decrease of 34.83% YOY 2022. China’s exports of pesticide products are undergoing rebalancing and demand levels are approaching pre-event levels.
Even though demand in the Southern hemisphere has been unleashed after CAC Shanghai, overcapacity remains a key constraint on the price trend of pesticides in China. According to CCPIA’s data, from January 2021 to September 2023, China’s pesticide industry has invested more than USD $9 billion in production capacity expansion. The new capacity of AI was 560,000 Mt, and the new capacity of intermediates was 1.13 million Mt. Currently, the new capacity is mainly concentrated in provinces of Gansu, Inner Mongolia, Jiangxi, Hubei, and Liaoning.
If we understand the behavior of Chinese entrepreneurs, it’s very hard for them to give up. Especially after the scale effect, if you want them to withdraw from the product category they have already invested in, it is simply impossible. In 2023 December, China’s listed pesticide company Lanfeng Biochemicals transferred 100% of the equity interest in Ningxia Lanfeng Fine Chemical Co. to Hebei Netlink Agricultural Science Co. The wholly owned subsidiary, Ningxia Lanfeng Fine Chemical Co., Ltd., had been in a state of loss for a long period of time and incurred serious loss in 2023 for Lanfeng.
根据情况，兰丰生化对其固定资产计提了相应的减值准备。因此，为了进一步优化公司整体资产结构，兰枫生化对旗下子公司进行了剥离处置。对于缺乏竞争力和内部治理效率的企业来说，彻底退出市场竞争往往是无药可救的结局。
中国市场的竞争变得更加扑朔迷离。由于产能过剩的预期，中国氯虫苯甲酰胺AI的出厂价格已经低于40美元/公斤。由于产能释放预期增加，丙硫菌唑价格在18-22美元/公斤之间。即将大规模释放产能的派罗克杀草磺AI市场供应价格也出现快速下滑，目前价格在$77美元/Kg左右。未来，肟菌酯和醚菌酯的价格也将因新产能的出现而持续下降。
Chinese agrochemical companies are now looking for other high-growth tracks to expand their profit sources. What they don’t realize is that new competitors have already used the profitability of other tracks to leverage their competitiveness in agrochemicals production. Currently, most of the new competitors in the Chinese market are from the pharmaceutical/cosmetic and fine chemical sectors.
In addition to the advantages of the whole industry value chain, these competitors will also use the advanced experience of other tracks into the production of pesticides. Their diversified business model gives them enough momentum to compete in the supply of agrochemicals. In the company’s overall balance sheet, earnings in other areas can offset the low gross margins brought about by low prices in the agrochemical field. But what these companies are looking for is economies of scale. The full capacity of the whole industry value chain can improve productivity and reduce overall costs. If we look at their business, the first to open up the product category track could be the competitor rather than the conservative agrochemical companies. As the popular Chinese novel “Three Bodies” tells us, the innovators must exterminate the laggards who are unable to innovate themselves.
事实上，化工行业盈利的本质是大客户的销售。新的竞争对手可能需要时间来了解和熟悉农化行业。农化领域的全球注册也是一个潜在的障碍。但这条护城河并没有那么宽和深。对于新的竞争者来说，如果能够在关键点和关键人物上开出足够高的价格，那么全球注册和市场进入策略是相对容易获得的。
此外，新的竞争对手掌握了全产业链的优势，处于合成工艺开发的最前沿。他们优化了合成路线。这让新的竞争对手不必担心研发投入过多。同时，他们可以通过高度优化的合成路线实现高AI纯度和低杂质含量。原子利用率的提高使新竞争对手在未来的定价上处于更有利的地位。这也预示着一些老牌农化企业将在市场竞争中被无情抛弃。
Customers will always be profit-seeking. This does not contain any pejorative connotations. If I am faced with fierce competition in the end farmer market, I will also choose to utilize the new supplier with the largest capacity as well as the lowest price to balance the offers of other alternative suppliers. The sustainability of the supply of the new competitors cannot be questioned. This is because they have also served the leading multinationals in their field over the past decades of business development. But its business-to-business cooperation is limited by corporate culture. A zero-sum game is bound to arise between the strong contract terms of the crop protection multinationals and the low-priced new Chinese suppliers. But any business can be optimally balanced through negotiation. The clash of cultures will not prevent key customers from making the right decision. Therefore, the new competitor’s advantage will be long-lasting. Competition in the industry will increase. This might be the dilemma that overcapacity poses for entrepreneurs in China’s pesticide industry.
In the current Chinese pesticide supply market, there is no one who doesn’t care about PPO herbicides, no one who isn’t keen on the development of SDHI fungicides, and no one who doesn’t know about patent compounds that are about to expire in the next decade. Segmenting the global market value of an AI means nothing to a company’s strategic decision-making. Instead, who will our customers choose to work with in depth? That’s the question we should ask in the internal strategy meeting.
事实上，中国农药企业早已从企业家模式向职业经理人模式转型。在中国历史上，任何一个王朝的灭亡，以及新王朝的崛起，都隐含着令人遗憾的本质原因，那就是官僚机构的冗余。新王朝的领导人绝对是最优秀的，是在自然法则的约束下，在“神秘丛林”中通过竞争选出的。比如，在中国历史上的楚汉争霸中，汉朝开国皇帝刘邦有三大本事：一是博学多才；二是博学多才；二是懂得用人；第三，他知道如何纠正错误。这使得这位中国古代君主的身边环绕着一群极其能干的队伍。纵观目前的中国农药企业，这样的领军人物极为罕见。
In addition, the founders of China’s core agrochemical companies are aging. The erosion of time has forced them to train their successors. However, the greatest weakness of these heirs is that they have not experienced the pain that their fathers experienced. So, as the industry becomes more competitive, these heirs are forced to compete with new competitors. The new competitors, who have gradually emerged from the bottom of a pain-filled industry, will be the biggest obstacle for the heirs of traditional agrochemical companies in the coming era.
Rather than the history of the industry’s rise and fall, this is the history of the rise and fall of people and teams. The key is how long we interpret this history. It is very difficult to experience the rise and fall and continue the business for a hundred years. For China’s first pesticide entrepreneurs since the reform and opening up, thinking about the future may have just begun. The era of focusing on production and ignoring the link to the customer can be worry-free and profitable is over. The era of artificially created information asymmetry is also over. Starting from 2024, it will be the era that China’s agrochemical industry will be more transparent to global customers. The most important thing in this era is to link with customers in a brighter way with the philosophy of integrity thinking and grow together with customers. For Chinese agrochemical companies, an important question is in front of us, are you ready for the new era?