Trusted Market and Commodities-Trade Intelligence
According to the reports by many listed pesticide enterprises, their performance in the first half of 2018 exceeded market expectation. Six companies, namely Jiangsu Yangnong Chemical Co., Ltd., Shenzhen Noposion Agrochemicals Co., Ltd., Lier Chemical Co., Ltd., Jiangsu Changqing Agrochemical Co., Ltd., Limin Chemical Co., Ltd. and Jiangsu Lanfeng Biochemical Co., Ltd. published notices about their predicted performance improvement. Only two including Jiangsu Huifeng Agrochemical Co., Ltd. and Jiangsu Lianhe Chemical Technology Co., Ltd. predicted decreases in performance. In addition, most of those pesticide companies that hadn’t released their pre-reports had estimated growth in their first half year performance in their first-quarter reports.
Price rise in upstream chemical raw materials push pesticide enterprises to raise their product prices
As is known, petroleum is the most important cost in basic chemicals. Since the bottom-touch in 2016, the price of petroleum has been gradually climbing up, from USD30/barrel to USD70/barrel, which brings up the prices of raw materials for basic chemical products and those of pesticide intermediates; the constantly increasing production costs by pesticide producers push producers to raise the prices of their pesticide products under the increasing production cost pressure.
However, a lot of listed pesticide enterprises boast complete industry chain, which can guarantee raw material supply. Price rise is actually favorable news to the large ones.
Agricultural produce price rises support pesticide industry
In addition, the growing petroleum price also drives up the market demand for bio-ethanol and agricultural produces. The price uptrend of agricultural produces raises farmers’ planting profits, as well as their pesticide input and enthusiasm to plant more grains. Historically, agricultural produce prices led pesticide prices 1-2 years ahead.
Strengthening supervision on pesticide market benefits large enterprises to occupy more market shares
At the same time, the Ministry of Agriculture and Rural Affairs (MARA) also puts more efforts into market supervision and management. Recently, the MARA published the spot check results of pesticide supervision in 2017 and exposed a batch of enterprises producing or selling fake products. Local agricultural departments shall strengthen supervision on enterprises producing fake or shoddy pesticides and ask them to improve within a certain amount of time. Those with severe gravity shall have their production licenses revoked or transferred to judicial institutions. For regular enterprises, the marketing environment will become more and more favorable.
Support from pesticide export growth
The operation situation of overseas agrochemical giants also has a strong cycle. In the past decade, the peak of inventory appeared in 2007-2008 and 2013-2014. The gloomy prices of agricultural produces and high channel inventory during 2015-2016 made the pesticide industry enter the inventory-reduction phase. After that, the revenue and inventory of those giants embraced a rebound in 2017. In the history, the inventory supplementary period of the giants was usually 2-3 years. With the uptrend of agricultural produce prices, the inventory supplementary of global agrochemical giants is going on, which means the demand for pesticide technical is expected to welcome an uptrend.
On 16 May, 2018, on the Economy Operation and Analysis Conference for the Pesticide Industry, the Institute for the Control of Agrochemicals, Ministry of Agriculture and Rural Affairs (ICAMA) said that the domestic pesticide export is growing and is predicted to keep increasing in 2018 with a two-digit rise. In light of statistics data, during Jan.-April, China exported 444,000 tonnes of pesticides, growing by 6.5% year on year; the export value of those products was USD2.6 billion, growing by 44.7% year on year.
Environmental protection examination improves the supply-demand relationship, which favors large enterprise to raise their market shares
In the first half of 2018, the domestic environmental protection storm keeps going on. The environmental protection supervision group entered local provinces like Jiangsu, Hebei and Henan. Moreover, with the exposure of chemical factory problems in Lianyungang, Jiangsu Province, the central and provincial governments have paid high attention to the issue. Recently, Jiangsu Government published the Work Plan for Treatment of Coastal Chemical Parks within the Province, as well as the standards. It includes all chemical parks and chemical producers in Nantong, Lianyungang and Yancheng, which is also the reason why the operating rate in Guannan, Guanyun and coastal chemical parks is quite low, causing tight supply of pesticide technical products.
As pesticides and dyes cause serious waste water pollution, they will be largely affected by the environmental protection examination in the future. In March 2018, China produced 11.5% less pesticides year on year. The exit of small capacities improved the market shares of leading pesticide enterprises and their price negotiation abilities. In a short period, the environmental protection examination at the supply end will be stricter and the demand will rebound under the pull of petroleum price. Recently, the pesticide technical price may keep growing up.