With new environmental inspections arising in China's major pesticide production regions, the upward trend of glyphosate price will likely continue rising in the second half of 2017. The traditional peak season for glyphosate as well as huge mergers in the industry is supporting the development.
According to market intelligence firm CCM, the fourth round of China’s environmental inspections has been launched in the middle of August, It is worth noticing, that two provinces three are in the center of the new inspections, are Zhejiang, Shandong, and Sichuan, whose represent the main regions of China’s pesticide production with more than one-third of the national output. The increased environmental investigations will un-doubtfully increase the pressure on the manufacturers and affect the supply of glyphosate and its raw materials negatively, which supports further price hikes in H2 2017.
Due to the high waste occurrence in the glyphosate production process, manufacturers without qualified pollutant treatment facilities have to cut or suspend production under heavy environmental pressure.
In the first half of 2016, the Chinese glyphosate demand was sluggish, which caused a slowing-down of the production as well. The average price of glyphosate even fell by USD2,878 per tonne in 2016, which represents the lowest level for three years. After the drop, however, the Chinese glyphosate market recovered again, which is mainly due to the decrease of the inventory as well as the ban on paraquat AS, which turned many clients to switch to glyphosate as a replacement. Then in July and August, when the production was further restricted, another round of price rise arose throughout the entire glyphosate market.
Production problems of glyphosate in China are one of the main reasons for rising glyphosate prices in the second half of 2017. Raw material costs in China, for example for glycine and paraformaldehyde, are still on the rise since the beginning of 2017. In China, manufacturers mainly produce glyphosate from glycine or iminodiacetic acid. The glycine production line hereby accounts for a 70% proportion. The price hikes follow the stricter environmental regulations in the country and especially the region with the highest production share, Hebei Province. The lowered operation rate of the manufacturers in this province has caused lower supply and shortage, which pushes the price.
In the coming period of 2017, CCM expects that the domestic glycine prices will further go up, given continuously strict environmental regulations in leading producing provinces. Particularly, Hebei, which possesses a glycine production capacity of 240,000 tonnes per year, which represents 40 percent of the national total, may experience heavier environmental pressure and longer production suspension during heating season over 2016.
A strengthening market demand for glyphosate is another factor to drive the prices up. Domestic-produced glyphosate, which is traditionally mostly exported to overseas markets, has its peak sales in the third quarter each year. Yet, affected by the previous low price, producers had maintained low operating rate, reducing the overall market inventories. Thus, further shortage in supply can be expected during the 2017 peak export season.
Another factor that may keep the international glyphosate prices and the prices of other herbicides and pesticides high, is the occurrence of mergers by huge agrochemical companies in these days. Notable are hereby the merger of ChinaChem with Syngenta, Dow Chemical with DuPont, and Bayer with Monsanto. The large merger will without any doubt reshape the current global agrochemicals and seed market, with fewer but stronger enterprises control the prices and supply of their pesticide products for the world market. The huge enterprises do sell their genetically-modified seeds and promote the pesticides that are working well together, like Monsanto’s famous glyphosate containing Round-up. When fewer enterprises control the seeds and related pesticides, the supply and price competition may fall, which will keep prices high as a result.
Concern in the European Union
The European Union is pending the further approval glyphosate usage on European fields by the member states support, according to Reuters. The European risk assessment committee has recently proposed to label TiO2 as a carcinogen, backed up by laboratory results made on rats. The Agency states to have the scientific evidence, that TiO2 can cause cancer through the inhalation route, which would cause the classification in Category 2. The justification to classify the substance responsible for growing cancer, however, was repelled by the agency due to lack of evidence. As a result, the EU has no reason to doubt glyphosate is safe and can be approved by another 10 years, but the final decision depends on the approval of the national governments. According to Reuters, the EU member states have consistently failed to agree on a majority firmly in favour or against approving glyphosate.
In China, glyphosate is mainly used for the treatment of maize, wheat, cotton, sunflower, and sorghum. The size of the glyphosate market was more than USD400 million in the year 2015, which is mainly due to the growing food consumption in the country with a small percentage of arable land available. Worldwide, the market of glyphosate is expected to grow at a CAGR of more than 5% to 2024.
CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.
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