Three Problems for Chinese Glyphosate Producers       

The shadow of the global economic recession is fading. The crude oil price in the international market has picked up substantially. The planting area of GM (genetically modified) crops has begun increasing once again in the United States, Mexico, Argentina and other countries, so a further drop in the price of glyphosate has become unlikely. China's macro economy has gradually shaken off the impacts of the global financial crisis and started rehabilitation. The consistency of aid-agriculture policies is another support for glyphosate sales. Therefore, in the brisk application season of April and May, glyphosate producers can expect a considerable price increase for their products.
   According to experts, along with the gradual improvement of the domestic and the international economy, glyphosate's bright prospects are renewed. Three major problems are however worth great attention in China's glyphosate sector today.
   The first problem is that the total capacity to produce glyphosate in China should be reduced and the output of glyphosate should be controlled at around 300 000 tons a year. Macro (administrative) measures have to be taken to reshuffle glyphosate producers and force serious polluters and poor performers out of the market. Such a shakeout is essential to clean up the competitive environment, to concentrate production and to help sound development of the entire glyphosate sector.
   The second problem is that eighty percent of glyphosate produced in China still has to be exported, and China's glyphosate producers have not registered their products in enough other countries. Now foreign agencies typically register Chinese-made glyphosate in the destination countries, so the exports can be done only through these third parties, who earn large margins from the trade. The Chinese government should encourage and support the domestic glyphosate producers to arrange registration and certification in the United States, EU, Japan and other countries.
   The third problem is that Chinese formulations need to be promoted in foreign countries. This can be accomplished to a degree through registration. Typically China exports glyphosate technical material rather than formulations. Chinese-made glyphosate formulations, the final products for application, are exported only to Southeast Asian countries. Without certification China cannot export glyphosate formulations to the United States and South America, which are major glyphosate application regions. This has become a major bottleneck constraining the development of China's glyphosate sector. Glyphosate producers capable of addressing those markets should make great efforts to solve this problem.
   The selling price of glyphosate remains close to the production cost. Many producers have stopped making quotations to buyers and are waiting for a seasonal price rise. They expect the glyphosate price to pick up drastically, exceeding RMB30 000 per ton in the first quarter of 2010. The overall price rise of raw materials will be the major driver for the improvement of the glyphosate price.
   There are two major glyphosate production processes, namely the glycine process and the iminodiacetonitrile process. Raw materials include glycine, dimethyl phosphite, paraformaldehyde, iminodiacetonitrile, diethanolamine, phosphorous acid, liquid caustic soda, sulfuric acid, hydrogen peroxide and hydrochloric acid. Prices of basic chemical raw materials have recently increased. The price of yellow phosphorus is up from RMB11 000 per ton in the first half of 2009 to RMB17 000 per ton in January 2010. The price of liquid chlorine is up from over RMB800 per ton to RMB1 600 per ton. The price of sulfur is now more than 10% higher in the prior-year period. Therefore, the prices of all raw materials for glyphosate have increased. Despite a gradual pickup of glyphosate prices, producers suffer extreme cost pressure, and the operating rates of small producers are still quite low.