Glyphosate Price Climbs as Overseas Peak Demand Season Comes

By Zhang Weinong

The exports shrank in H1

From February to March of the year 2014,, the market price of glyphosate maintained to be relatively optimistic. In March, the price of glyphosate technical produced through the glycine route continued to rise and exceeded RMB35 000/t. However, as the market supply of glyphosate remained to be tight in H1 the actual transaction volume was limited despite an increasing amount of enquiry from downstream sectors. In early April, the mainstream quoted price of glyphosate increased slightly and was stabilized at RMB35 000 - 36 000/t. Beginning from the end of April, the glyphosate price rapidly reduced to RMB32 000 - 32 5 00/t, and further decreased to RMB30 000/t soon afterwards.
With the constant slack of glyphosate market during May to June, the price of glyphosate went all the way down, and even dropped to RMB25 000/t, the lowest level in 2014. However, the recent implement of environmental scrutiny on China’s glyphosate producers really offered a strong support for the glyphosate sector, the price once stopped falling and stabilized, and the market quoted price rose to around RMB28 000/t. There are three reasons for such a decline of glyphosate market in 2014. First, the export demand is soft. In particular, due to the serious drought, the consumption of glyphosate in North America can hardly make an increase. Second, the overall economic environment in South America is not optimistic, the traders’ funds are tense and their intentions to make purchases of glyphosate are not strong, resulting in a relatively low transaction volume in Chinese glyphosate market. Third, the high price hinders the purchase enthusiasm of downstream players. In March, the price of glyphosate rose slightly and the highest quoted price reached RMB36 000/t. While in March 2013, the average price of glyphosate was only RMB34 500/t. The obvious year-on-year price rise resulted in downstream players’ fear of appearing persistent price increase. Because of these reasons, the enthusiasm of purchasing glyphosate in Chinese market is generally low in H1.
Glyphosate is mainly used for the control of weeds in fields of transgenic crops, and there has not been a large-scale cultivation of transgenic crops in China, so 80% of domestically produced glyphosate products are for exports. South America is the major glyphosate export destination of China. The decrease of demand for glyphosate in South America led to the price reduction of glyphosate, and suppressed the price trend of glyphosate from June to the end of July.
From the view of exports in H1, export volume of glyphosate technical from China declined considerably compared with the same period of 2013. In the first five months, the export volume of glyphosate had a year-on-year decrease of over 20%, and the number of export orders was less than 300, a year-on-year drop of over 30%. In the first four months, the average export price of glyphosate technical had a rising trend, and the monthly export price was also higher than that in the same period of 2013. However, with the slack demand in the global market, the average export price in May began to decline, and dropped by 6.5% and 1.3%, respectively compared with that in May 2013 and April 2014. From the view of exports in June, the export price continued to decrease. In June and July,, the price of glyphosate maintained at a very low level. However, considering the production cost of glyphosate is RMB25 000-26 000/t, there is not much room for the further decline of the glyphosate price.
The ever-increasing pressure for environmental protection in China has caused the supply reduction of glyphosate. According to the data from China Crop Protection Industry Association, in the first five months of 2014, China’s output of glyphosate technical had a year-on-year decrease of 15%, the number of enterprises also reduced considerably, and the operating rate was only around 50%. Meanwhile, the transaction fell in a light volume due to the weak demand from both in China and abroad.

Glyphosate price will maintain to be low and stable in H2

In the whole July, the overall glyphosate market in China was stable, and the price maintained to be low and stable. Due to no signs of rebound in the market, most small and medium enterprises arranged their sales according to their production, and large enterprises gave priority to complete the long-term contracts. According to the sources from many enterprises, at present, except large enterprises with the long-term sales orders as security, most small and medium enterprises faced difficulties in product sales, so the operating rate was lower than before. “The demand is weak, but the plant also has to operate, the products cannot be sold out, the inventory costs also increase, and considering the constant increase of environmental pressures, the living space of domestic glyphosate enterprises is gradually shrinking”, said a pesticide trader from Zhejiang province. According to the report, since April, affected by the price decrease, the monthly output of glyphosate has dropped drastically compared with the same period of 2013 and has basically maintained at the level of 36 kt. In addition, the inventory has remained at medium or low level. From the view of raw material market, the price of glycine recently has maintained relatively stable with only a slight decrease. The price of yellow phosphorus also has had a declining trend, while the PMIDA (N-phosphonomethyl iminodiacetic acid) price has increased. Therefore, the cost of raw materials offers little support for the price rise of glyphosate technical. At beginning of H2, the glyphosate price still maintained at a low level. During this period, enterprises in the glyphosate industrial chain were overall in the stage of reducing inventory and the dealers had less inventory. Therefore, in the next few months, the number of glyphosate transaction orders will increase obviously and the price will probably stop falling and begin to climb.
The verification standard on the environmental protection of glyphosate is considered “the most severe in the history”, and the increased investment of glyphosate enterprises on environmental protection poses bigger threats to the small and medium enterprises. It is reported that producing one ton of glyphosate will need an investment of RMB2 000-4 000 for the treatment of wastes (including waste gas, waste water and industrial residue). For an enterprise with a 10 kt/a of capacity to make glyphosate, its investment for the treatment of industrial wastes will be preliminarily estimated to be around tens of millions of RMB. Boosted by the first batch list of enterprises that passed the verification standard on the environmental protection of glyphosate, some enterprises have slightly lifted their glyphosate prices after the rising cost of environmental protection. However, restricted by the terminal demand, the price has lacked force to increase substantially. The demand for glyphosate technical is soft, and the market transaction of formulations is passable. The market price of glyphosate has maintained to be extremely low for about one month.

Overseas peak demand season is coming and the price of glyphosate will rebound

It is worth noting that the peak season of demand for glyphosate in South America is coming during September-October. Therefore, the glyphosate price will usher in a new round of price rise, and glyphosate may be in short supply. In China, glyphosate is a popular herbicide variety with the fastest development, the highest output and the largest export volume. In August, the players also began to make purchases in the world market. Beginning from early August, the international pesticide buyers have entered into China and begun to negotiate about the procurement with domestic large pesticide companies.
In August, with the advent of overseas procurement, the number of orders in glyphosate market increased constantly, and the price of glyphosate climbed. According to the latest data from the National Bureau of Statistics of China, in early August, the price of 95% glyphosate technical was RMB28 250/t, a rise of 0.9% compared with that in early July. According to an industrial insider, stimulated by the peak demand season in the world market, the glyphosate market will hopefully usher in the recovery.
“The global demand for sterilant herbicides in no-tillage agriculture has rose year-on-year, and the planting area of glyphosate-resistant transgenic crops will increase, so the demand for glyphosate formulations will climb,” said an engineer from Zhejiang Wynca Chemical Industrial Group Co., Ltd., “the global planting area of transgenic crops reached 175.2 million hectares in 2013, up 2.9% year-on-year, so the annual consumption growth rate of glyphosate will maintain at around 10%.”
This round of price rise is stimulated by the peak demand season in the world market. Considering the transportation time, foreign companies have already begun to make purchases of glyphosate, and the present time is often seen as the key node of an abrupt turn in the market. September and October of each year are the peak season of demand for glyphosate in South America, and the substantial purchases of glyphosate from China will also gradually start.
At present, more foreign companies discuss glyphosate business with four enterprises (Zhenjiang Jiangnan Chemical Co., Ltd., Nantong Jiangshan Pesticide Chemical Industry Co., Ltd., Jiangsu Youth Chemical Co., Ltd. and Hubei Trisun Chemicals Co., Ltd.) that pass the verification on the environmental protection. These four enterprises have large market share and a substantial degree of the pricing right of glyphosate. Boosted by demand growth in the world market, the turning point of glyphosate market will hopefully appear in mid- or late-August, and be probably more obvious in September. Whether the glyphosate market will really recover depends on the order quantities of overseas purchases.