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Analysis Of Current Pesticide Market
Sep 19, 2018

                         Analysis of Current Pesticide Market

 

 

                                                        Market Overview

 

Everyone in the industry has been impressed by the past 2017 pesticide market, which has been affected by environmental inspections and capacity removal, The production of raw drugs is restricted and controlled in large areas, and many products are faced with tension and shortage. The prices of all kinds of TC(Technical Material or Active Ingredient)  are surging at a time.

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By the end of October in 2017, the domestic pesticide market had crossed a high point and gradually reversed, with both supply and demand falling. Until March 2018, this period of demand slowdown is constrained by two aspects:

(1) high prices of TC make foreign trade customers  wait and see, peak demand was delayed, domestic TC is on the decline in exports ; 

(2) .The high price of TC has also caused the domestic pharmaceutical factories to wait and see, delaying the taking of goods, On the other hand, the factory needs to digest the stock and  the realization of the QR code for product packaging as of January 1, 2018, as required by the new regulations on pesticide administration to reduce  distirbution in the market shop.

However, in April 2018, the sewage from the chemical park in Lianyungang, Jiangsu province, was exposed by CCTV.  Immediately, the state Ministry of Environmental Protection and the environmental protection department of Jiangsu province took action. Three chemical industrial parks in the Lianyungang irrigation river basin (the gangkou chemical industry park, the yanwei port chemical industry park and the xiangwater chenjiport chemical industry park) have been checked and stopped. The environmental assessment of Yancheng Binhai and Dafeng was limited.  As an industry leader, the Huifeng farming is  also  unable to produce because of environmental protection.  A series of measures, so that China's pesticide industry upper chain was cut off at once.Therefore,a large amount of TC was once again out of stock.


                     【Price changes (data from the end of 2017, from the Pesticide Industry Association)

 

                    

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As for glyphosate , after a period of 2013, 2014, which the glyphosate market broke out, the market entered a low and steady W phase in 2015, and the overall index remained between 56.0-62.0; In 2016, the downturn continued, the index fell as a whole, the index remained between 51.0- 54.0, of which the transaction price was high in June, the index was 58.57;
Since the end of 2016, the overall price rises in the pesticide industry affected by the pressure of environmental protection and supervision, and glyphosate has risen significantly. The index remained basically between 67.0-75.0 in the first half of 2017, with prices falling significantly in mid-June and July, with the index falling back, and then rising again in the second half of the year. Reached a maximum of 76.64 by December. The reason is: 1. the chemical raw material intermediate market as a whole up, 2. due to capacity constraints on production and supply of glycine dual impact, 3. When the market is in short supply, the supplier takes the opportunity to raise the price.

 

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  Other bulk herbicide TC products  showed a different degree of recovery, transaction prices rose in 2017, of which Atrazine rose  by 41.32%, paraquat  rose by 70.82%, The increases of 2, 4-drops rose by 30.33%, acetochlor rose by 29.52%, butachlor rose by 18.13%。 flurolene and isomethylamine by 9.94 % and 9.13% respectively.

  The pesticide price index (CAPI) as a whole also rallied sharply in 2017, with the biggest increase among the three categories. In December, CAPI reached 119.16, the highest in nearly three years, went up 2.71 %by on a quarterly basis , up by 59.61% year-on-year,which was up 51.05% from the beginning of January. Overall, except for a slight drop in March and July ( dropped by 1.02% and 0.20% month-on-month), CAPI has largely maintained a rising trend, as shown in figure 2.  The sharp rise in CAPI was due to the increasing weighted transaction price of pesticides., taking the new nicotine pesticides as an example,Under the background of general rise of chemical raw materials,the key intermediate of this kind of insecticide(Raw materials of ccmp: acrolein, acrylonitrile), have increased greatly.In addition, under the pressure of environmental protection, the construction of ccmp production enterprises is limited, resulting in insufficient market supply. And safety production and TC production enterprises shutdown and environmental problems.The price of this kind of pesticide is rising rapidly, imidacloprid is up 76.64 %, acridine is up 120.82% and, thiamazine is up 70.45%.

  Among other major pesticide products, Abamectin rose by 58.19%, Profenofos by 23.00%, chlorpyrifos by 53.44%, and Fipronil by 54.76%. Lacy-cyhalothrin rose by 30.80%, Emamectin benzoate by 54.75%, malathion by 51.20%, Triazophos rose by 42.67%,Trichlorfon by 8.46% and Acephate by 6.76% respectively.

  The price index for fungicides (CAPI) rose in volatility in 2017,and the price index for fungicides at 111.35 % in December, up 2.36%, up 13.62% year on year ,according to the China pesticide industry association.

It was up 11.27% from January, the highest in nearly three years for W, the first time to  break 111.0 point.
  Overall, the price index for fungicides in the first half of 2017 was less volatile, maintaining at 98.0-103.5. 

At the second half of the year, affected by the industry as a whole,, the original material prices rose significantly. The month of 8-11 remained at a high of 106.5-109.0 and continued to rise to its highest value in December. 

  In terms of products, the transaction price of most of the original medicine products has increased to varying degrees. Among the commodities, Bacilline rose 6.60%, valizol up 38.51 %, arboryl up 16.63%, fluoxazole up18.51% , propanazole up 33.22%, phenylene cyclazole up 20. 62%, Imidamine up 9.76%.The prices of Carbendazim and Mancozeb Not much has changed compared with the beginning of the year.

 

Policy Combing and Typical Event Impact

 

  Economists often sum up the factors that influence  the market into two hands: one is the invisible hand (ie, the law of supply and demand), and the "invisible" hand, and the roles of the government – the "visible" hand. (also known as Keynesian intervention).
We often need to analyze and distinguish the essence and law of economic phenomena with the thinking of two sides (political economy) so that what we see is close to the truth.

 

Supply-Side Structural Reform and Address Overcapacity

 

  Supply-side structural reform aims to adjust the economic structure so as to achieve optimal configurations factors and improve the quality and quantity of economic growth.

  China's supply and demand relationship is facing a structural imbalance that cannot be ignored. Therefore, the emphasis on supply-side reform is to start from the production and supply side, adjust the supply structure for the real start of domestic demand, to create new power for economic development.

   On January 26, 2016, the 12th meeting of the central leading group on finance and economics proposed the fundamental purpose of supply-side structural reform, which is to raise the level of social productivity. We will implement the idea of people-centered development.  On the 18th October, 2017 ,report of the 19th national Congress of the Communist party of China pointed out that deepening supply-side structural reform.

 

  Document no. 1 of the central committee points out that the development of modern agriculture must push forward the supply-side structural reform of agriculture and accelerate the transformation of the development pattern. Take the road of agricultural modernization with high output efficiency, product safety, resource saving and environment-friendly. Pesticide is necessary agricultural production material, it is the foundation that safeguards produce quality and safety and prop up. Agricultural supply-side reform is bound to put forward new demands on the supply structure of pesticide products.The target of reducing pesticides in the twelfth five-year plan for the pesticide industry (2011-2015) was not met, which resulted in the 13th five-year plan for the pesticide industry (2016-2020). Clearer and more onerous tasks have been proposed.

 

   Target of the 13th five-year plan: by 2020, the number of primary pesticide enterprises in China (more than 2,000 w enterprises with production qualification by the end of 2015) will be reduced by 30%。Among them, the annual sales of more than 5 billion yuan in pesticide production enterprises reached more than 5, the annual sales of more than 2 billion yuan enterprises reached 30 and efforts to cultivate 2 -3 enterprise of annual sales of more than 10 billion yuan, with international competitiveness of large enterprise groups.

   Domestic top 20 pesticide enterprises total sales reached more than 70 of the total.Try to build 3 - 5 specialized pesticide production zones for production enterprises, and strive to make more than 80 of the total number of primary pesticide enterprises move in chemical concentration areas by 2020.

China's pesticide production enterprises are mainly located in Jiangsu, Shandong, Henan, Hebei and Zhejiang provinces, which account for more than 68% of the country's agricultural output. Pesticide sales revenue of more than 1 billion yuan, there are 28 pesticide enterprises in the above-mentioned areas.Sales revenue in 0.5 -1 billion yuan of pesticide production enterprises are also concentrated in this region.

   China is the world's largest producer and exporter of pesticide raw material. Nearly half of  raw materials are exported. The pesticide industry has experienced a downturn from the second half of 2014 to the second half of 2016. From the second half of 2017, China's pesticide inventory began to decline, thanks to the effectiveness of pesticide supply-side reform.


                                 Industry monopoly and break through

 

   About 77 percent of the global market for pesticides is dominated by six multinational companies:BASF, Bayer, Dow and dupont (Dupont has merged with Dow, with a combined market value of $140 billion, with a market share of $14.3 billion), Monsanto (Monsanto has been acquired by Bayer for $60 billion, with a combined market share of $20 billion) and Syngenta (Syngenta, acquired by chemchina for $43 billion, with a combined market share of $15 billion) The industry is extremely concentrated, at present, the six agrochemical enterprises have been further integrated into the four giants, whose business covers the creation of new , the production of TC and formulations and the sale of global channels. While, Chinese enterprises mainly focus on TC processing and export.

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   Although the pesticide market is expected to gradually recover in 2017, but faced with the huge pressure of oligarchic enterprises, there will be more agricultural enterprises, especially small and medium-sized enterprises, to choose the path of merger and reorganization.It is expected that the high pressure of environmental protection will become the norm in the future, so that small enterprises with backward technology and greater pollution will be eliminated from the industry,Enterprises above the scale will have more advantages, production capacity will be concentrated to large and medium-sized dominant enterprises, industry concentration further increased.With the strict control of pesticide enterprises, the barriers to pesticide industry will be further increased and the number of pesticide production enterprises will continue to decrease in the future.

   On July 25, 2017, China national chemical corporation (chemchina) completed its work on Syngenta, a Swiss agrochemical and seed company. The $43 billion acquisition also set a record for Chinese companies to make a single overseas purchase.The merger was first proposed in November 2015 and formally agreed in February 2016. It was then vetted by regulators in the United States and the European union and eventually approved.The merger is also one of the three major mergers and acquisitions in the global chemical industry. After the merger and acquisition, Syngenta stock delisted and became a wholly owned subsidiary of China chemical group. Syngenta is the world's largest pesticide company, the third largest seed agrochemical high-tech company, has 259 years of history, is the world's most valuable agricultural brands.And Chemchina buys Syngenta to let Chinese company one step entered the first line of global agrochemical dimensions.

 

                          

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                     Safety accidents and supervision

 

In the past two years, fine chemical industry, agricultural and chemical industries happened frequent accidents affecting the management of the heart.

At around 16:18 on March 17, 2017, a fire broke out in the first workshop of Jingmen jinxianda biotechnology Co., Ltd., located in Jingmen chemical recycling industrial park, There were no casualties, but the loss of property was huge, and shutdown for a long time.

On may 24, 2018, at 8.40 am, Flash explosion occurred in the salt water tank during the welding of the frozen brine pipe in the acrolein workshop in Hubei Jinghong biotechnology Co., Ltd., which located in Pucheng economic development zone of Puyang city. Two employees were injured and rushed to the hospital and died at about 10 am on the same day.The accident of these two factories has directly affected the production pattern of Emamectin benzoate , and also caused the shortage.

At around 2.20 a.m. on December 9, 2017, an explosion occurred in workshop 4 of juxin biotechnology Co., Ltd., chemical industry park, dugang, liyungang city, Jiangsu province. Explosion triggered partial collapse of workshop no. 6,caused 10 people dead and 1 people injured.  

The accident is a landmark event that has caused the state administration of security and  supervision to attach great importance to the safety of fine chemicals such as pesticides and intermediates.After the accident, the state administration of safety supervision convened the head of the chemical enterprise in Jiangsu province to experience the accident on the spot, warning everyone to do a good job in daily safety management. The impact of the accident on the pesticide industry was to cause a gap of 3000 tons per year of : 1,3-Dichlorobenzene  , which

resulted in the shortage of raw materials in lower reaches of Difenoconazole and propiconazole,The price of the original medicine has shot up, so far the price of Difenoconazole is still high.


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At 18:30 hours on July 12, 2018, an explosion occurred in Yibin Hengda technology Co., Ltd in Yangchun industrial park, jiangan county, Yibin city, Sichuan province.(Illegal production of herbicide midazolam and pesticide intermediates) So far, 19 people dead and 12 injured in the accident.This is the largest chemical accident since the 2012 explosion in Kerr, Hebei province, which killed 29 people.The the Sate Council security Council has listed the accident to supervise.

                     

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                      Environmental pollution and regulation


Marx said that capital is with original sin, which is on the road of China's rapid development of industrialization. It is the overuse of resources, the destruction of the environment, and the lack of labor protection for workers.With the public's concern for the quality of the environment and the introduction of various administrative measures in recent years, the basic state policy of environmental protection is becoming a substitute for the assessment of GDP. As a tool to reverse the pattern of domestic industrialization.

The new environmental protection law, which was revised on January 1, 2015, has now been implemented, and the new law has increased its penalties due to the provision of daily penalties, seizure and administrative detention. Known as the strictest environmental laws in history.With the introduction of the new environmental protection law as a starting point, domestic enterprises will face a new, more stringent environmental law enforcement environment. With the increasingly stringent environmental protection laws and regulations in China, there has been an increase in the regulation of  wastes in the production of pesticides. Some pesticide production enterprises with substandard emissions are unable to obtain a production license, thus regulating industry production and improving the competition pattern of the industry.

           

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On June 26, 2018, the Ministry of ecology and environment announced on its official website that the fourth environmental protection inspection team of the central government was monitoring the subsidence in the cities of Xuzhou and Suqian w, Jiangsu. It was found that the waste reaction kettle, storage tank, chemical waste bucket and reagent bottle in lanfeng biochemical plant were piled up in the open air.On the evening of June 13, lanfeng biochemical notice said that the new branch, based on the on-site inspection and requirements of the superior environmental protection supervision department, and the company's careful research decision, from June 12, 2018. In addition to some environmental protection treatment equipment, the remaining chemical production workshop to implement stop-production rectification, It is expected to stop production for about 2 months, the period is expected to reduce the company's net profit of about 20 million yuan.

Director of the Ministry of Environmental Protection, Cui Shuhong, pointed out that she did not agree with some voices that environmental protection would affect economic and social development and lead to higher prices of raw materials.
   In the past, some enterprises that have violated the law to discharge pollutants have drastically reduced the cost of environmental protection and even failed to invest in environmental protection at all. That Seriously disrupt the order of market competition, hindering the optimization and upgrading of industrial structure.

We will intensify efforts to protect the environmentpurify the market environment, promote economic restructuring, improve the quality of economic development and safeguard the rights and interests of the broad masses of people. This is what environmental inspectors should do.

   On July 2, 2018, the national development and reform commission issued the opinions on innovation and improvement of the price mechanism for promoting green development, which are clear until 2020. China will basically form a price mechanism and price policy system to green development (Green development is to develop environmentally friendly industries, reduce energy consumption and material consumption, protection and restoration of the ecological environment, the development of circular economy and low-carbon technologies, so that the economic and social development and natural phase coordination.)



 Implementation of the regulations on pesticide management

 

On June 1, 2017, the newly revised regulations on the management of pesticides began to come into effect, and the five related regulations will come into effect on August 1, 2018,including the administrative measures on the registration of pesticides, Measures for the administration of pesticide production license, measures for the administration of pesticide business license, measures for the administration of pesticide registration test, measures for the administration of pesticide labels and instructions

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In accordance with the regulations on pesticide administration, the measures on the administration of pesticide business license and the relevant requirements of the Ministry of agriculture and rural areas, the operators of pesticides in China must meet the corresponding operating conditions before August 1, 2018. Need to obtain a permit for the operation of pesticides.

From August 1, 2018, a large number of operators who do not meet the operating conditions and have not obtained a pesticide operating license will be eliminated or banned; The agricultural sector will provide full coverage, seamless, digital and retroactive supervision of all pesticide operators and their products.

In the first half of 2018, three subsidiaries of a prepared listed company in Jiangxi province sold fake and shoddy pesticides to 22 provinces, including Zhejiang, Shanghai and Shandong. At present, the amount of money involved in the case has been verified to be over $19 million.Recently,the county procuratorate of Xianju, Zhejiang province, had approved the arrest of 15 suspects on suspicion of producing and selling fake and inferior products.

 

                     Market Summary

When beautiful China is no longer the slogan, when the Yangtze river development is going to great protection, when the blue sky defense war is officially launched, the ecological red line across the country is gradually drawn, a series of coherent policies. The fate of pesticide chemical industry must be closely related to it.

Domestic and foreign downstream customers have recognized that the pesticide industry has been re-established in the seller's market, in the uncertain production situation of pesticides and chemicals to seize the slightest certainty, The focus of the trade turns to spot.So far, the fundamentals of pesticide raw material are still very discontinuous production, Imbalance between supply and demand, some products are out of stock or prices hit record high.

 

                         2018.08