Pesticide Industry Stable in 2014

By Duan Yousheng, China Crop Protection Industry Association (CCPIA)

In 2014 China’s pesticide industry performed steadily, with output continuing to grow slowly. Given the reduced area for grain planting and the uncommon weather in some regions, domestic pesticide prices fell year on year. The economic performance of China’s pesticide industry kept increasing despite a little decline of profit rate. The favorable balance of foreign trade in pesticides continued to improve.

A small growth of output

In the first 11 months of 2014, 369 makers of active pesticide ingredients (API) reported a total output of 3.383 million tons, a growth of 1.7% year on year. Of that, herbicide makers achieved a positive growth of output, but both insecticide and fungicide production fell off. The output of herbicides increased 3.8% year on year and reached 1.627 million tons, accounting for 48.9% of the total pesticide output, compared with 47.1% in 2013. Totally, 77 main makers produced 209 000 tons of fungicide active ingredients, a year on year drop of 1.9%, with the output being 6.2% of the total pesticide output, while it had been 6.4% in the first 11 months of 2013. Insecticide output dropped 4.6% to 540 000 tons, 16% of the total, compared to 17% in the same period of 2013. The domestic production of herbicides grew significantly. The drop of domestic insecticides output was mainly caused by the shrinking market share of insecticides used for paddy rice, particularly in those insecticides that are used to kill and control rice borers; more market share was occupied by trans-national insecticide giants. China’s output of pesticide active ingredients in the first 11 months of 2014 is shown in table 1.    
  

Table 1   China’s output of pesticide active ingredients, Jan-Nov 2014 (kt)

Category     Number of makers    Cumulative output     YoY Growth (%)
Chemical pesticides    369    3 383    1.7
Insecticides    142    540    -4.6
Fungicides     77    209    -1.9
Herbicides     119    1 627    3.8


Table 2   China’s import and export value of pesticides, Jan-Oct 2014

Category    Sum of import and export (million US$)    YoY Growth (%)    Favorable balance (million US$)     YoY Growth (%)
Pesticides    4 192.89    12.3    2 899.19    13.1
Insecticides    1 044.96    16.0    766.24    22.2
Fungicides     623.58    10.5    64.98    -0.7
Herbicides     2 348.39    10.4    2 069.95    10.9


Table 3   China’s import of pesticides, Jan-Oct 2014

Category    Import volume (kt)    Import value (million US$)    YoY growth of import volume (%)    YoY growth of import value (%)
Pesticides    77    646.85    22.1    10.6
Insecticides    9    139.36    0.7    1.8
Fungicides     26    279.30    16.5    12.0
Herbicides     23    139.22    22.4    6.9


Table 4   China’s export of pesticides, Jan-Oct 2014

Category    Export volume (kt)    Export value (million US$)    YoY growth of export volume (%)    YoY growth of export value (%)
Pesticides    990    3 546.04    6.1    12.6
Insecticides    203    905.60    6.0    18.6
Fungicides     63    344.28    4.3    9.4
Herbicides     689    2 209.17    6.5    10.7


Import, export and favorable balance all increased

In Jan-Oct 2014, China’s sum of import and export of pesticides amounted to US$4.193 billion, a year on year growth of 12.3%, and the favorable balance (export minus import) was US$2.899 billion, an increase of 13.1% annualized, as shown in table 2.
China imported 77 000 tons of pesticides in Jan-Oct 2014, an increase of 22.1% year over year; an import value of US$647 million, a year on year growth of 10.6%, (the growth of volume being larger than that of value, translating into an increasing average import price) as shown in table 3. Of that, the import of fungicides was 26 000 tons and US$279 million, with YoY growth of 16.5% and 12.0% respectively; that of herbicides being 23 000 tons and US$139 million, growth of 22.4% and 6.9%; insecticides 9 000 tons and US$139 million, growth of 0.7% and 1.8%. Fungicides occupied the biggest share in pesticide import.  
China exported 990 000 tons of pesticides in Jan-Oct 2014, an increase of 6.1% annualized, and the ten month cumulative export value was US$3.546 billion, growing 12.6%, as shown in table 4. The growth of both export amount and value were larger than growth in the same period of 2013. The growth of volume was smaller than that of value, translating into an decreasing average export price. Among the total pesticide export, herbicides contributed to 689 000 tons and US$2.209 billion, YoY growth of 6.5% and 10.7% respectively; insecticides contributed 203 000 tons and US$906 million, growth of 6.0% and 18.6% respectively; the annual exported volume and value of fungicides grew 4.3% and 9.4%, respectively. Unlike imports, the share of fungicides among pesticides exports was very small, 6.1% by volume and less than 10% by value. In the global pesticide market, fungicides accounted for 26%.
Compared to 2013, both the volume and value of pesticide exports increased. The average export price for the first 10 months was US$3 600 per ton, compared with US$3 300 per ton in the same period of 2013. The price increase can be attributed to the increased volume of pesticide formulations exported.    

Prices went up and then dropped

According to the statistics of CCPIA, the monthly Chinese average price index of pesticides (CAPI) in March was the highest of 2014 and that in December was the lowest. Among pesticides, herbicides occupy the biggest market share; and therefore they have the biggest influence on the pesticide market and CAPI. Glyphosate and paraquat, the most popular herbicides, both enjoyed continual price growth in the first quarter of 2014. The highest transaction price of glyphosate in Q1 2014 reached RMB32 900 per ton, growing 7.72% than in the beginning of 2014. Then glyphosate prices fell sharply in April-May. The price of paraquat also reached its yearly peak of RMB94 000 per ton in March and then fell rapidly in April and May, standing at RMB84 600 per ton at the end of May. As of the end of 2014, the weighted average transaction price of paraquat was around RMB83 000/t and that of glyphosate was RMB28 000/t.

Profits increased at a slower rate

In Jan-Oct 2014, the total assets of China’s pesticide industry reached RMB201.684 billion, an increase of 10% year over year; pesticide revenues amounted to RMB244.173 billion, increasing 8.8% on a yearly basis; total profit was RMB17.07 billion with an annualized growth of 5.9%. The yearly growth rate of total profit gained in the biochemical and microbial pesticides sector was 19.6%, far larger than the 4.5% growth in the chemical pesticides sector, as shown in table 5.

Table 5  Financial performance of China’s pesticides industry, Jan-Oct 2014 (Billion RMB, %)

Category    Total assets    YoY growth     Revenues     YoY growth     Profit     YoY growth
Pesticides total     201.68    10.0    244.17    8.8    17.01    5.9
Chemical pesticides    184.37    9.8    221.44    9.0    15.24    4.5
Biochemical and microbial pesticides    17.31    13.2    22.74    7.3    1.76    19.6


Table 6   Investment of China’s pesticides industry, Jan-Aug 2014 (billion RMB, %)

Category    Planned investment     YoY growth     Actually completed investment     YoY growth     Number of projects under construction    YoY growth
Pesticides total     73.58    13.9    32.73    33.6    433    8.0
Chemical pesticides    43.04    31.3    21.83    36.3    300    12.8
Biochemical and microbial pesticides    30.53    -4.0    10.90    28.5    133    -1.5



Company losses decreased  

With the improvement of economic performance in the pesticide industry, the number of unprofitable companies fell 2.5% from 2013. In the first 8 months of 2014, the total loss reported by the unprofitable companies was RMB344 million, a year on year drop of 5.2%. The proportion of unprofitable companies was 9.3%, compared with 9.5% in the same period of 2013.

Investment trend   

The development of new pesticide products and the related construction attracted more investment, and the money invested in environmental protection and automation also grew. In Jan-Aug 2014 the year on year growth of actually completed investment reached 33.6% in the pesticide industry, of which 36.3% was in the chemical pesticide sector and 28.5% in the biochemical and microbial pesticides sector. The actually completed investment in the chemical pesticide sector was 66.7% of the pesticide industry's total. The details are shown in table 6.  

M&A going on

Pesticide related mergers and acquisitions were more frequent around the world, including China. In 2013, 12 pesticides manufacturers were acquired, and in 2014, nine M&A events involved in 18 pesticides makers. Details are as follows.
1. Ganzhou Weinong Pesticides Company Limited (API maker) merged with Jiangxi Suifeng Pesticide Chemical Company Limited (formulation maker) into Ganzhou Weinong Pesticides Company Limited (API maker), with a total registered capital of RMB30.08 million.      
2. Anyang Quanfeng Biological Technology Company Limited (API maker) merged with Anyang Chemical Experimental Factory (API maker) into Anyang Quanfeng Biological Technology Company Limited (API maker), with a total registered capital of RMB50 million.
3. Hebei Shenghe Chemical Company Limited (formulation maker) merged with Hebei Normal University Chemical Factory (API maker) into Hebei Shenghe Chemical Company Limited (formulation maker), with a total registered capital of RMB5 million.
4. Shenyang Research Institute of Chemical Industry (Nantong) Chemical Technology Development Company Limited (formulation maker) merged with Jiangsu Huanong Seed Coating Agent Company Limited (formulation maker) into Shenyang Research Institute of Chemical Industry (Nantong) Chemical Technology Development Company Limited (formulation maker), with a total registered capital of RMB5.1 million.
5. Shenyang Aiwei Technology Development Company Limited (formulation maker) merged with Shenyang Xingnong Chemical Pesticide Company Limited (formulation maker) into Shenyang Aiwei Technology Development Company Limited (formulation maker), with a total registered capital of RMB5 million.
6. Shanxi Guangda Chemical Company Limited (formulation maker) merged with Fujian Haolun Biological Engineering Technology Company Limited (formulation maker) into Shanxi Guangda Chemical Company Limited (formulation maker), with a total registered capital of RMB5.1 million.
7. Zhangzhou Longwen Agricultural Chemicals Company Limited (formulation maker) merged with Fujian Kefeng Pesticide Company Limited (formulation maker) into Zhangzhou Longwen Agricultural Chemicals Company Limited (formulation maker), with a total registered capital of RMB5 million.
8. Qingdao Star Crop Technology Company Limited (formulation maker) merged with Shaanxi Chuangxian Biology Chemicals Company Limited (formulation maker) into Qingdao Xingpai Plant Technology Company Limited (formulation maker), with a total registered capital of RMB30 million.
9. Fujian Sino-dashing Bio-engineering Company Limited (formulation maker) merged with Sichuan Nuofuer Crop Technology Company Limited (formulation maker) into Fujian Sino-dashing Bio-engineering Company Limited (formulation maker), with a total registered capital of RMB11 million.
Besides the above mergers of production assets, other business transfers and acquisitions of the Chinese pesticide industry in 2014 are listed as follows:
10. Xingfa Group acquired 51% of Taisheng’s shares, previously held by Jinfanda, and achieved an absolute controlling stake in Taisheng Chemical, which improves its phosphorus chemical industry chain.
11. Huifeng Joint-Stock acquired 53.2% of Jialong Chemical’s shares. As an important raw material for Huifeng Agrochemical’s multiple products, Jialong’s annual output of 20 000 tons of carbonyl chloride will optimize Huifeng’s production level and expand its domestic market.
12. After taking gratuitous transfer of Jinmao Group’s 100 000 shares, Sinochem Group actually became the new controlling stakeholder of Yangnong Chemical, as it holds 40.59% of the shares of Yangnong Group, the controlling shareholder of Yangnong Chemical.
13. ADAMA made a full acquisition of CNAC’s businesses in China, including Jiangsu Anpon, Jiangsu Maidao, Jiangsu Huaihe Chemical, and Sanonda Group.
14. Huapont Nutrichem invested the self-raised US$220 million in Albaugh in the US, thus acquiring the company’s 2500 voting shares and 22 500 non-voting shares. After the completion of the transactions, Huapont Nutrichem held 20% of the target company’s voting shares and 20% of the non-voting shares.
15. Noposion invested RMB19 million of its own funds in Zhejiang Mitsuo Seed and thus acquired 20% of Mitsuo’s shares.
16. Xingfa Group acquired assets of Hubei Yuerui Environmental Protection Technology’s projects related to treating saline wastewater from glyphosate production, for RMB87.91 million.
17. Changqing Agrochemical acquired Nantong Fengtian Chemical’s intangible assets for RMB7.19 million.
18. Sinochem invested a total of RMB970 million to acquire the entire equity of Sinochem Agrochemical, Shenyang Sciencreat Chemicals, Sinochem Agrochemical HK, Sinochem Agrochemical Brazil, and Sinochem Agrochemical Argentina.

Policy and environmental protection

In 2014, the government announced the first batch of companies that can meet the requirements of environmental protection for glyphosate production, and large scale glyphosate makers developed and spread the clean production process. From July 1, 2014, the government ceased the registration and production licensing of paraquat aqueous solution and prohibited its production. Makers of paraquat mother liquid are still allowed to register for exporting paraquat aqueous solution and using it in their operations abroad, and to produce paraquat aqueous solution only for export. From July 1, 2016 China will prohibit the sale and use of paraquat AS. At present, some companies have already developed new dosage forms of paraquat and got successful registration, so we see that the commercial production of new paraquat dosage forms is developing.