CCM: Will Chinese suppliers succeed in raising prices of glyphosate

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Publish time: 27th June, 2016      Source: CCM
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  At the end of May 2016, Zhejiang Jinfanda Bio-Chemical Co., Ltd. (Zhejiang Jinfanda) increased the ex-works price of glyphosate TC, which immediately generated echoes among the glyphosate industry. Then in early-June, Anhui Guangxin Agrochemical Co., Ltd. also announced its intention to raise the glyphosate TC price and together with Zhejiang Jinfanda increased the prices by USD45.53/t (RMB300/t).

  

                                                                                                    Source: Baidu

  

  It should be noted that this was the first time Chinese glyphosate enterprises actually raise the ex-works prices in 2016 and industry insiders forecasted that the supply-demand situation of the glyphosate industry will undoubtedly improve.

  
According to the 13th Five-year Plan for the Pesticide Industry, China will continue strengthening the industrial concentration, improving the self-innovation ability and technical equipment, adjusting and optimizing product structure, protecting the ecological environment and saving resources for the industry.

  

  The country, in the meantime, will establish large-sized pesticide enterprises/groups through merger & reorganization and share-holding reforms. At the moment, some small-sized glyphosate enterprises have suspended production due to overcapacity; consequently the process of merger & reorganization is predicted to notably speed up, driven by related policies.

  

  At the same time, the glyphosate industry will be integrated at higher speed, forced by the losses in the industry and those enterprises of large scale and strong survival ability will gain greater power in pricing, which will affect the current passive market condition. 

   

  Factors boosting the glyphosate price:

   

  1. Losses force enterprises to increase the price.

  

  Since the glyphosate price has dropped to a historical low, most of glyphosate enterprises are suffering from losses and, therefore, suppliers are willing to raise the prices especially when the glyphosate price approached the cost line. According to the previous two price circles of glyphosate, the price always drops for 3 years and, since the glyphosate price has dropped for almost 3 years by now, suppliers have started hoping to get the chance of raising the price again.

   

  

  

  2. The increasing environmental cost fuels suppliers' momentum to raise the price.

  

  China is currently having the glyphosate industry undergoing strict environmental requirement. Affected by the environmental policies, part of the outdated capacity has been rectified and some unqualified enterprises gradually exited the market. This occurs because environmental factors are known to play a greater role in boosting the industry integration, especially when driven by the supply-side reform.

   

  3. The reducing supply volume stabilizes the glyphosate price.

  

  As the market remains depressed for a long time, operating rates and inventories maintain a low level. What's more, some glyphosate enterprises with small- and medium-scale production capacity suspended production due to pressures from environmental protection, which obviously caused a fall in glyphosate's supply volume.

  

  Furthermore, the G20 summit to be held in Sept. will limit to some extent the chemical production around Hangzhou City, Zhejiang Province, which is inevitably going to affect the glyphosate industry. Glyphosate enterprises also conduct summer maintenance from July to Sept. each year, which will further reduce the supply volume.

   

  4. Traders start to stock up goods, pulling up the price.

  

  "China's supply volume of glyphosate is predicted to keep decreasing in H2 2016, and this will most definitely stimulate purchasers to place an order or will increase enquiries," forecasted some industry insiders.

   

  5. The ban of paraquat AS will make room for the glyphosate market.

  

  From 1 July, 2016 onwards, paraquat AS which occupies large market shares will be banned from the Chinese market and, thanks to this, glyphosate, one of the major substitutes for paraquat, will embrace a new boom.

   

  Factors stopping the glyphosate price from rising:

   

  Since about 80% of glyphosate is exported from China, the demand from overseas markets is crucial for the industry. Nevertheless, the suggestion on renewing the glyphosate registration put forward by the European Commission on 6 June did not obtain a majority of support from the permanent commissions for animals & plants and food & feed, consequently, the future of glyphosate still remains unclear in the European Union (EU) market.

  

   Although the sales volume of glyphosate in EU region only accounts for a small proportion in the world's total, the EU's policies on glyphosate still pose a large impact on other countries' policies.

   

  So whether Chinese suppliers will succeed in rising the glyphosate price or not remains to be seen.

  

  This article comes from Glyphosate China Monthly Report 1606, CCM

  

  

   

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  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.

   

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  Tag: glyphosate