Five Trends Changing China

CHINA’s chemical industries are rife with change. Environmental preservation, governmental priorities and an underlying priority to be more competitive on a global level are spawning innovation, stronger companies and emphasis on quality formulations. The China Crop Protection Industry Association (CCPIA) is collaborating with industry working groups to monitor capacity and production to ensure supply correlates to global demand.

Facility Upgrades, Industrial Parks

With increasing public awareness of environmental safety, quality and preservation, as well as the government’s promotion of reduction of energy consumption and waste discharge, pesticide manufacturers must be more vigilant about their facilities. In recent years, regulatory officials have escalated their enforcement and closing of facilities that fail to meet effluent discharge standards. According to the 12th Five-Year Plan released in the beginning of 2012, new site applications for pesticide manufacturing should be located in chemical parks with updated manufacturing systems, and formulation producers are moving to areas that have accessible transportation systems and access to markets.

Newer Molecules, Formulations

Since the highly toxic organophosphorus pesticides, including methamidophos, were banned in 2007, the need to replace these chemistries has been a high priority. Last June, five ministries including the Ministry of Agriculture and the Ministry of Industry and Information Technology published a joint announcement stopping the production and sale of 10 products, including fenamiphos. Another 12 highly toxic products have been blacklisted, and it is expected they will be banned after final reviews and analysis.

The industry is emphasizing environmentally friendly formulations, such as water-based pesticides formulations, emulsion in water, suspension concentrate, water dispersible granules and microcapsule suspension, which are becoming more mainstream. The output and application of these new types of formulation products have been increasing, while the output of traditional formulations like emulsifiable concentrates are declining. There is also continuous progress in mitigating the use of toxic solvents and adjuvants in pesticide formulations.

Stronger Companies

Consolidation in the agrochemical industry has been identified by both government and enterprise as an important and necessary path for strengthening enterprises’ ability to compete on the global stage. Since 2008, mergers and acquisitions have accelerated, and many enterprises like Shenzhen Iprochem, Lier Chem, Zhejiang Wynca, Yangnong Chemical, Chongqing Huapont and Sinochem conducted successful mergers with small- and medium-sized enterprises. The most influential merger was ChemChina, which purchased a controlling stake in Israel’s Makhteshim-Agan for $2.4 billion in 2011.

In 2012, the Chinese government will continue to encourage the emergence of large corporations by joint ventures, mergers and restructuring among enterprises. In addition to the shakeout among smaller companies, some industrial giants and publicly traded companies will also take the leading role in promoting the consolidation process. It is believed there will be more merger and acquisition activity involving larger transactions during the next few years.

The creation of more competitive companies, in conjunction with upgraded facility requirements, will render some smaller companies obsolete.

Innovation as a Strategic Goal

Chinese enterprises have realized the importance of technology innovation and are willing to invest more in research, development and process management. In 2011, the Strategic Federation of China Agrochemical Enterprises on Technology Innovation was established, which promotes enterprise-led innovation in China’s pesticide industry. Many of its members showed great interest and progress on the patent application, especially in the area of product mixtures.

Some notable companies, such as Shenzhen Nopoison, hold more patents in China than the Big 6, when looking at one particular product variety.

In 2012, with the government’s encouragement of more innovation, the industry is developing a plan to create GLP capacity that has mutually recognized data standards to further the accessibility of Chinese brands in the export market.

Exports of Finished Goods

For the first time, the value of exported formulated products has surpassed the value of technical exports. This illustrates the priorities of Chinese producers and strategic goals for industry steering committees.

The crop protection input industry will increasingly take a global view in 2012, with special focus on the developing countries like Brazil and Argentina. Therefore, we believe pesticide exports from China will continue to rise. After several years, Chinese pesticide enterprises like Shenzhen Iprochem, Ningbo Tide and Shandong Rainbow have proven their excellence in the overseas market by setting up new plants and exporting products.

The traditional target markets for China’s agrochemicals are East Asia and South America, while the North American, Australian and European markets are seldom entered due to the high barriers to entry or trade barriers. However, China’s agrochemicals have made significant progress in entering these more mature markets in recent years.

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