Rising Costs Boost the Prices of Conventional Pesticides   

Since the beginning of 2011, pesticide production in China has entered a high-cost stage. From December 2010 to February 2011, although the sales of pesticide are in the slow season, the prices of conventional pesticides are all 10% - 20% higher than in the fourth quarter of last year. For example, glyphosate PAI (pesticide active ingredients) is RMB24 500 /t, high-efficient cyhalothrin PAI RMB170 000 - 175 000 /t, cypermethrin PAI RMB97 000 - 98 000 /t, and chlorpyrifos PAI RMB34 000 - 35 000 /t. According to statistics, 70% to 80% of conventional pesticide varieties have higher prices.
   There are three major factors for the pesticide price hike. First, the raw material price hike is the primary factor to boost the prices of pesticide products and the soaring production costs of pesticide manufacturers. Pesticide prices mainly fluctuate with the ups and downs of chemical raw materials prices. In 2010, the price of organic solvents increased substantially, and the price of phosphorus, which is the basic raw material of organic phosphorus pesticides, also rose steadily, forcing the prices of organic phosphorus products, such as chlorpyrifos, dichlorvos and profenofos, to grow by more than 10%. Since 2009, acetonitrile, an important raw material of nitenpyram, has been in short supply. Its price has risen from RMB20 000 - 30 000 /t to RMB120 000 /t. The high price of acetonitrile will likely continue in 2011. The current price of 95% nitenpyram PAI of mainstream pesticide manufacturers is RMB420 000 /t. If acetonitrile prices remain high, the price of nitenpyram PAI will continue to rise.
   The production cost of glyphosate has also increased. There are three reasons for this. The first one is that the price of paraformaldehyde, which is the main raw material of glyphosate, has been climbing higher and higher. The second reason is that a substantial increase in natural gas prices boosts the production costs of natural gas-based glycine and iminodiacetonitrile. The third reason is that the international crude oil price hike has driven up the production cost of diethanol ammonia, which is the main raw material of IDA-process-based glyphosate.
   Second, the rise of the comprehensive environmental treatment costs and the implementation of the energy-saving and emissions-reduction policy have increased the operational costs of pesticide manufacturers. For example, the basic manufacturing cost of glyphosate is now RMB24 500 /t, but it also has an environmental treatment cost of about RMB10 000 /t. There are now more than 2 600 pesticide manufacturers in China. Their average investment in environmental protection accounts for about 4.86% of their total investment. But in the EU and the United States, the investment in environmental protection usually accounts for about 30% to 40% of the total investment of a pesticide project.
   Third, the cost of overseas products registration and the processing cost of trade frictions have increased. Every year, China exports about 1 million tons of pesticides. As China has excess capacity for most of its pesticide products, manufacturers have to export their products to overseas markets. In order to prevent the potential profits of their export products from being snatched by foreign OEM export companies, many Chinese pesticide manufacturers have to spend huge sums of money for product registration in foreign countries. The registration cost of a brand is about US$100 000 in Russia and about US$20 000 in Africa. And it is even costlier in the EU and the United States. As China's export of pesticides grows rapidly and their prices are low, Australia, Brazil, Argentina, the EU and the United States have initiated anti-dumping investigations on China's pesticide products. In recent years, in order to address the growing trade frictions encountered in the export of pesticides, many Chinese companies have spent huge sums of money.
   In short term, China's pesticide industry faces the following troubles in the downturned market environment: high-priced raw materials, growing environmental costs and increasing export costs. These challenges will bring the pesticide industry greater operational pressure.   (By Zhang Nong)