Glyphosate Prices Gradually Stabilize    

Due to the elimination of the glyphosate export tax rebate in China and the appreciation of the RMB against the US dollar, competition in China's glyphosate market has become even keener. However, this has also stopped the expansion of China's glyphosate capacity.
   In June 2010, when it was rumored that the Chinese Ministry of Finance would abolish the export tax rebate (9%) for glyphosate active ingredient, both the export price of glyphosate active ingredient and its domestic price immediately dropped to a record low, falling from about RMB20 000 /t to RMB18 000-18 500 /t, and the prices of glyphosate formulations also declined. On July 15th, Chinese authorities formally abolished the export tax rebate of glyphosate active ingredient. Together with the appreciation of the RMB against the U.S. dollar, this is a huge blow to China's glyphosate industry, which exports more than 70% of its output. But in July, glyphosate prices started to rise. For example, the price of 95% glyphosate active ingredient produced by Nantong Jiangshan Agrochemicals & Chemical Co Ltd (Jiangshan Agrochemicals) was RMB21 500 /t in July, 10.2% higher than its June price of RMB19 500 /t. The export price of glyphosate active ingredient produced by Leshan Fuhua Agro-chemical Technology Co Ltd was RMB21 500 /t in July, up about 39%. The glyphosate export prices of several other major glyphosate producers in China also rose in July. There are two factors for the rebound of glyphosate prices. First, an increasing number of glyphosate producers stopped production, leading to the decline of the industry's overall operating rate. As of June 2010, China had 124 registered glyphosate producers, of which 61 had obtained glyphosate production licenses. But in July, only a few producers still persisted in producing glyphosate steadily. Second, serious floods resulted in a substantial decrease in agricultural production this year, so China needs to improve its agricultural production per hectare. Glyphosate is very useful in increasing production per hectare. The rising domestic demand for glyphosate has helped its prices rebound.
   The glyphosate prices of different manufacturers vary greatly and are mainly determined by their production costs, especially by the investment in the treatment of wastewater. Producing one ton of glyphosate active ingredient can result in 4 - 5 tons of mother liquor. Take Jiangshan Agrochemicals as an example. The treatment of the mother liquor will increase the production cost of its glyphosate active ingredient by more than RMB2 000 /t. Some responsible large-scale enterprises have invested large amounts of capital in pollution control, so the production costs and the sales prices of their products are relatively high. But some irresponsible middle and small-scale enterprises have invested little in pollution control, so their products have lower prices and are more competitive in the short run than those of large-scale enterprises.
   In the first half of 2010, China's export volume of glyphosate increased, but the export prices declined. The government abolished the export rebate of glyphosate intending both to curb exports of glyphosate and to reduce the excess capacity of China's glyphosate industry. By taking such a step, China also hopes to urge glyphosate producers to enhance their product export prices, reducing trade friction. On December 1st, 2008, the export tax rebate rate of glyphosate was raised from 5% to 9%, which helped the export price of glyphosate to decline further and attracted more foreign customers. Superficially, the government's favorable policies had seemed to save a lot of glyphosate enterprises, but the reshuffling process of the glyphosate industry had not accelerated - it had slowed down. This had also indirectly led to the crazy expansion of the glyphosate industry in the past two years. In 2009, the gross margins of several listed companies' glyphosate business units were all below 20%. Because of this, these companies have taken some active measures to address the problems brought by the disappearance of the rebate. For example, Zhejiang Wynca Chemical Industry Group Co Ltd said that it will further adjust the ratio of domestic and international sales, strengthen its domestic marketing efforts and increase its export of glyphosate formulations.
   The exchange rate of RMB against the U.S. dollar has become the most elusive and biggest factor that affects the export of glyphosate. Because of sensitive changes of the exchange rate recently, some glyphosate producers have been afraid to take orders for fulfillment two months in the future.
   Currently, in addition to the pressures brought by economic factors, glyphosate producers also face competition from substitute products.
   Due to its long history of use, some weeds have developed resistance to glyphosate. This has provided an opportunity for some selective herbicides to replace glyphosate. Transgenic crops that can resist glyphosate have been planted in 114 million hectares of farmland in 23 countries. So far, 35 species of weed have been found to have a resistance to glyphosate. In some cases, glyphosate-resistant crops hybridized with weeds, resulting in glyphosate-resistant weeds. At the same time, it has been found that decarboxylase is resistant to glyphosate. New glyphosate-resistant mechanisms are also forming.
   Phosphorus is the major raw material for the production of glyphosate. It is a non-renewable resource and the reserves are shrinking at a rate that worries many experts. Morocco, China, the United States, South Africa and Jordan have the world's largest apatite reserves. Taking into account the long-term reliance on their phosphate resources, the world's major phosphorus producers (the United States and Morocco) are gradually reducing their phosphorus output. But China's phosphorus output has been growing very rapidly. Given the current consumption level, China's high-grade phosphate resources will last only about 20 years. Because of the limited phosphorus resources, various companies are developing some non-phosphorus, non-selective herbicides to replace phosphorus-containing, non-selective herbicides for transgenic crops.
   While continuing to develop glyphosate-resistant transgenic crops, various companies are also actively developing transgenic crops that can resist other herbicides. Meanwhile, they are developing other non-selective herbicides to replace glyphosate. Transgenic crops that can resist non-selective herbicides, such as glufosinate-ammonium, sulfosate and bromoxynil, have been successfully developed. At present, no weeds can resist glufosinate-ammonium.