CCM: How Hubei Xingfa will fare after investment into glyphosate remains open to question 07-21-2016  653

In June 2016, some domestic securities dealers presented their views on reports that, if the markets of phosphorus ore, glyphosate and phosphate fertilizer make turnarounds, Hubei Xingfa Chemicals Group Co., Ltd. (Hubei Xingfa)'s performance will rebound. To refute these opinions, Hubei Xingfa issued an announcement immediately. This becomes a novelty to the Chinese A-share market.



Source: Baidu


Currently, the glyphosate market is in fierce competition – price slumps continuously and profit margin narrows – mainly due to oversupply, overstocks by clients, and concentrated operation of new production lines. "In such depressed market, glyphosate price will not rebound in the short run," disclosed industry insiders. Unexpectedly, Hubei Xingfa invested a large sum in expanding the production capacity of glyphosate.

 

In Jan. 2014, Hubei Xingfa acquired Hubei Trisun Chemicals Co., Ltd. (Hubei Trisun) to expand glyphosate production line. However, due to week market demand, Hubei Trisun's glyphosate price kept falling, leading to poor performance these few years.


This dragged down Hubei Xingfa's net profit by 84.37% YoY in 2015 and by 32.03% in Q1 2016. In 2014 and 2015, Hubei Trisun did not fulfill the commitments, at only 97.85% and 45% respectively of the contracted net profit. The figure in H1 2016 was also very low.

 

In Jan. 2013, Hubei Trisun constructed a 100,000 t/a glyphosate production line, which was under trial production, according to Hubei Xingfa in Nov. 2015. "Now, the chemical project examination and approval become stricter in China. If we do not expand production line, our production facility will be eliminated when the entry criteria for the industry gets higher," explained Hubei Xingfa.

 

Prior to this, Sichuan Hebang Biotechnology Co., Ltd. and Sichuan Fuhua Tongda Agro-chemical Technology Co., Ltd. had announced their capacity expansion plan for glyphosate. In the future, Hubei Xingfa will bear increasing sales pressure in such fierce competition. 


 


Glyphosate, as a sterilant herbicide, once got popular in the market with price even up to USD15,038/t (RMB100,000/t). However, the market has showed downtrend since 2009. Specifically,

 

  • 2009-2012 – depressed
  • 2013-2014 – price up to USD6,767/t (RMB45,000/t) thanks to the implementation of environmental inspection in China and the improving overseas demand
  • Mid-Sept. 2014 – price started to decline
  • June 2016 – USD2,707/t (RMB18,000/t), down 60% over the highest in 2013

 

Although the market ushered in a traditional peak season in Q1 2016, glyphosate price still maintained low. Industry insiders believed that oversupply will get more serious, and market competition will intensify because:

 

  • Domestic consumers show a resistance to genetically modified crops to which glyphosate is mainly applied
  • Gradually released domestic capacity, weak demand from grains (continuously falling prices) and poor export

 

So, how Hubei Xingfa will fare after investment into glyphosate remains open to question.


This article comes from Glyphosate China Monthly Report 1607, CCM

 

 


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.

 

Tag: glyphosate

 

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