Research Report on China's Glyphosate Industry, 2018-2022
Glyphosate is a herbicide invented by Monsanto in 1970. Its patent expired in 2000. The wide use of glyphosate results from the enlargement of transgenic crop cultivation area. As the most widely used herbicide in the world, glyphosate is mainly applied to transgenic crops such as soybeans, corn and cotton because of low toxicity, no residue and broad spectrum. At present, the global glyphosate production capacity concentrates in China. In 2017, the global glyphosate production capacity was 1,065,000 tons, including 380,000 tons of Monsanto and 685,000 tons of Chinese enterprises. Due to China's supply-side reform and environmental supervision, China's glyphosate industry is more integrated and concentrated. The glyphosate industry is a typical polluting industry. The production of glyphosate can generate plenty of waste water. Therefore, it is unlikely to expand production capacity substantially within a short period under current environment protection pressure.
According to CRI, there is a stable increase in global transgenic crop cultivation area in recent years. In 2016, the transgenic crop cultivation area was 190 million hectares, increasing by 3.0% YOY. Correspondingly, the global sales of glyphosate exceeded USD 5 billion in 2017. China is a major glyphosate exporter in the world. Over 80% of China-made glyphosate is exported to account for over 60% of the global supply. The output of glyphosate in China increased from 316,000 tons in 2010 to about 505,000 tons in 2017. In 2017, China exported over 300,000 tons of glyphosate technical, which satisfied more than half of the global glyphosate demand.
At present, the glyphosate synthesis process is mature, and the technical barriers in the industry are low. However, the Chinese government is tightening the environmental supervision over the glyphosate industry in recent years because it is difficult to deal with the large amount of wastewater generated in the glyphosate production process. Many small and medium-sized enterprises quit owing to the high costs of four-round environmental supervision and continued market downturn. In the past two years, the increasing industry concentration led to integrated factories of raw materials and products that have cost and resource advantages as well as non-integrated factories that have certain scale advantage. The competition in the industry is becoming increasingly fierce.
The strengthened enforcement of environmental protection laws has not only increased the production costs of glyphosate enterprises but also tightened the supply and increased the price of glycine, the upstream raw material of glyphosate. Driven by higher costs of raw materials and production, the market price of glyphosate grows higher but the profitability becomes lower. It should be noted that the global glyphosate demand will continue to grow in the future as the continued expansion of transgenic crop cultivation area broadens the market space of glyphosate. In addition, China has forbidden the use of highly toxic herbicides such as paraquat but the transgenic crop cultivation area is expanding. Therefore, the domestic glyphosate demand will also continue to grow.
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