A recent article published by AgroPages, entitled, “Glyphosate Production in China to Decrease by 43%,” attracted market attention at home and abroad. The article states that inspections on phosphorus producers conducted by the Chinese Ministry of Ecology and Environment since April could affect glyphosate production, resulting in a reduction in production capacity by 43%.
After the article’s release, leading pesticide companies from Brazil, Germany and Southeast Asia contacted AgroPages to discuss the probability of a 43% decrease in glyphosate production. These companies are worried about the potential collapse of the international glyphosate market caused by the situation in China, as suggested by the article, because no other countries can produce the same volume of glyphosate, leading to higher prices of terminal products and forcing farmers to seek alternatives.
The Chinese Government’s current environmental compliance policy does not specifically target glyphosate production, it also focuses on phosphorus production. The policy aims to control the production of yellow phosphorus to reduce the environmental impact caused by its by-products, such as the damage caused to the protected Yangtze River.
More than 60% of producers of phosphorus-based products in China are located in seven provinces and municipalities along the Yangtze, including Hubei, Guizhou, Yunnan, Sichuan, Hunan, Chongqing and Jiangsu. Pesticides are only a small part of the downstream industry. Within the region, only 29 companies produce phosphorus-containing pesticides, out of 692 companies involved in phosphorus production.
Glyphosate is currently experiencing low demand worldwide and global production is relatively weak. A US market sales director from a world-famous generic pesticide multinational said to AgroPages that the future of glyphosate in the US is uncertain, as most distributors are waiting to see if Bayer will be hit with more lawsuits related to glyphosate. The US has not increased its tax on glyphosate technicals, but its tax on glyphosate formulations was increased to 31%. Distributors are expected to take appropriate actions according to market trends.
Glyphosate factories have gained considerably from the latest round of price rises, but this situation may change. The price of glyphosate continued to fall since November last year. Recently, due to corrective actions taken by the upstream industry, the price of yellow phosphorus has risen, which also affected the price of glyphosate that rose for a certain period. However, several large companies still have adequate inventories. At present, the price of glyphosate has begun to fall to a certain extent.
Chinese manufacturers generally believe that the price of glyphosate will not change much soon. According to communications between AgroPages and glyphosate manufacturers, factories are only easing production and not shutting down. The rise in the price of glyphosate acts as a general reference for some manufacturers and traders. There will be no serious reduction in production capacity, and there are no existing factors causing price rises.
A representative of a Chinese manufacturer told AgroPages that when the price of yellow phosphorus was rising, they also wanted to raise the price of glyphosate. However, the international supply and demand situation has now changed. After the Sino-US trade war began, Thailand's import quota system was implemented and imports were banned in Vietnam, considering that these countries are major importers. The price of yellow phosphorus only rose for a month and fell back quickly. The price of yellow phosphorus hit a record high of Yuan23,500 in the last week of July, even reaching Yuan25,500 in some regions of China. Soon after, the price fell to Yuan18,500-20,000. Last week, the price in Yunnan Province fell to Yuan15,970 while in Sichuan Province, the price began to decline, staying at around Yuan16,400 due to environmental compliance regulations.