In 2022, the actual demand for the herbicide glyphosate will increase, but the price will continue to fall. Although the price of glyphosate has been reduced by more than 40% this year, the current price is still high for downstream preparation factories, which affects the demand for downstream products. The industry predicts that the price of glyphosate will likely fall back to 35,000-40,000 yuan/ton in 2023, and the return of relatively conventional prices and profits will drive the rebound of downstream demand.
Lower demand lowers prices
China's production of glyphosate technical ranks first in the world. China's raw medicine consumption is dominated by foreign trade, with domestic sales accounting for 10-20%. In 2022, the proportion of glyphosate export preparations will increase, and the market demand for glyphosate water-dispersible granules, water preparations and other preparations will continue to grow in regional markets such as South and North America.
But since the beginning of this year, the price of glyphosate has continued to drop, from 79,000 yuan/ton at the beginning of the year to 47,000 yuan/ton at the end of the year.
In this regard, people from relevant production companies told reporters from the Financial Associated Press that the price correction of glyphosate was relatively rapid in the first half of the year, and there were more high-temperature maintenance and accidental shutdowns in the third quarter in summer. Stabilized, the price continued to fall during the winter storage period in the fourth quarter, and the low volume of new orders is expected to continue until around the Spring Festival. The person also said that although glyphosate companies have taken concerted actions to reduce production and ensure prices, the low demand at the end of the year and the rapid price drop exceeded the expectations of original drug companies.
A trader in the glyphosate industry told a reporter from the Financial Associated Press that since the fourth quarter, the domestic demand for glyphosate has been weak, mainly because downstream preparation factories have not seized the traditional peak season of gold, nine and silver ten because of the high price of the original drug. Instead, the technical glyphosate is purchased according to the rigid demand according to the downstream orders, so the demand for goods is greatly suppressed. In terms of export, the sales volume has also continued to decline since the fourth quarter, so the price of glyphosate will continue to be depressed.
According to the latest customs export data, the total export volume of non-halogenated organophosphorus derivatives containing glyphosate in November was only 29,904 tons, which was more than 50% lower than the peak month of the year.
There is room for further price cuts
At present, the main domestic glyphosate producers are Xingfa Group (600141.SH), Jiangshan (600389.SH) and Yangnong Chemical (600486.SH) and other large listed companies, with high production capacity. In the second half of 2022, Inner Mongolia Xingfa Technology's 70,000-ton glyphosate technical plant will be put into operation, and new production capacity will be released, which will improve China's overall glyphosate supply capacity and increase industry concentration.
Relevant business people told reporters from the Financial Associated Press that at present, the supply and demand of glyphosate in 2023 will show an incremental pattern, and the market will show a trend of oversupply. At present, most of the original drug manufacturers are actively developing their own downstream preparation brands. With the downstream preparation brand, the original drug manufacturers have room for product adjustment, which can solve the problem of part of the original drug inventory accumulation, and also make the future of glyphosate Sales become more flexible. Under the current market conditions, technical drug companies that do not have their own brand preparations in the future may face greater sales pressure.
In addition, some people in the industry told reporters from the Financial Associated Press that in addition to the relationship between supply and demand, glyphosate currently has a relatively high profit margin, and there is indeed room for further price cuts. The current price of glyphosate is 47,000-48,000 yuan/ton, the cost is around 28,000 yuan/ton, and the profit margin exceeds 50%. Even taking into account the impact of the continued price rise of raw materials such as yellow phosphorus and phosphorus trichloride next year, it is reasonable for the price of glyphosate to fall below 40,000 yuan/ton. Moreover, for original drug companies, after the price drops, the demand will inevitably increase, and small profits but quick turnover may bring some positive stimulation to the profits of the company. However, at present, domestic glyphosate companies are unanimously holding up prices, and downstream demand continues to shrink. It is not good for the overall healthy development of the industry in the future.
According to the survey data of Longzhong Information's annual report, 95% of the surveys on the market trend in 2023 of China's major domestic sample companies, traders and downstream factories are bearish on the market next year. These companies believe that in 2022, domestic glyphosate will run at a high level, and the profit margin of the original drug will be wide.
Although there is an increase in the demand side in 2023, the price reduction of glyphosate may return to rationality, and the profit will change to a reasonable space, which is beneficial to the development of the industry.
