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Profit of insecticide manufacturers further squeezed

In May, the profit of insecticide manufacturers in China is further squeezed by the increasing production cost of insecticides and relatively stable market prices of most insecticides.

June 13, 2011 - PRLog -- (10-Jun-11,CCM)In May, the profit of insecticide manufacturers in China is further squeezed by the increasing production cost of insecticides and relatively stable market prices of most insecticides. Production cost of various insecticides has kept increasing this year, while most insecticides' market prices remain relatively stable at present, which directly drags down the profitability of domestic insecticide manufacturers.
Besides the increasing raw material prices, the shortage of power supply in China further increases domestic insecticide manufacturers' load of production cost. It's reported that many regions in China, say Zhejiang Province, Jiangsu Province and Hunan Province, have suffered greatly from the power shortage since March 2011. In order to release the situation, the local governments sequentially take measures like power brownouts and giving precedence of power supply to residents. All these measures greatly affect the operation of local enterprises, especially those with high energy consumption like pesticide manufacturers. Take Zhejiang Province as an example, it is facing the severest power shortage in recent seven years. Like Jiangsu Province, Zhejiang Province is also a region where many pesticide manufacturers located, including many famous ones like Zhejiang Shenghua Biok Biology Co., Ltd., Zhejiang Xinnong Chemical Co., Ltd. and Zhejiang Yongnong Chemical Co., Ltd.

The severe power shortage in these pesticide production regions has posed great impact on pesticide manufacturers' production mainly due to the power brownouts. In order to tide over the difficulty, some manufacturers decide to maintain or purchase generator sets, aiming to generate power by themselves. According to Mr. Liu, Production Manager of Nantong Jiangshan Agrochemical & Chemicals Co., Ltd., the company has recently maintained a standby 15MW generator set and keeps it in standby mode. Once power brownouts happen, it will be put into operation immediately. For sure, the upkeep or purchasing expense of generator sets is counted into the production cost.
The market prices of most insecticides remain relatively stable in May except some like DDVP, whose growth in market prices is majorly driven by the relocation of some major insecticide manufacturers. As expected, 2011 should be a great year for pesticide consumption. But it seems that the extreme drought in North China has broken the expectation. As reported, the drought in the middle and lower reaches of the Changjiang River, where the major rice production region lies, is called the worst for recent 50 years. According to the latest data from the Ministry of Civil Affairs (MCA), so far, the extreme drought has affected about 3,705,100 hectares' crop farmland, 166,800 hectares of which are unproductive. Though MCA didn't reveal the exact amount of affected rice farmland, it can be learnt from some seed companies that the sales volume of rice seeds has seen a steep drop. According to a worker from Yuan Longping High-Tech Agriculture Co., Ltd., the company's sales volume of early rice seeds and middle-season rice seeds is greatly affected by the drought, which has suffered a YoY decline of around 20% this year.

The extreme drought not only affects the sales of seed companies, but also drags down the sales of pesticide companies. According to Mr. Fang, executive director of Yiyang Southern Agricultural Services Co., Ltd., owing to the drought, the company's sales of all pesticides is gloomy in Hunan Province, especially rice insecticides. The situation in some other provinces along the middle and lower reaches of the Changjiang River is similar to that in Hunan Province, said Mr. Fang. It's expected that this year will be a great year for pesticide sales but it turns out to be a desperate year, he said. Farmers won't purchase pesticides since they can't plant rice without water.
Besides, the dull sales of some vegetables and fruits, which may be caused by inflation, also lowers farmers' growing enthusiasm, which will further drag down the insecticide consumption and threaten insecticide manufacturers' profit.

Source from:Insecticides China News 1106

Insecticides China News 1106
Though May is the traditional peak season of pesticide sales in China, pesticide dealers take a dim view of the sales due to the current slack market demand in China. Drought in South China and draggy sales of vegetables are the major factors leading to the depressed market demand, which also breaks pesticide manufacturers' previous expectation of large pesticide consumption in 2011. Market prices of most pesticides, especially insecticides, remain relatively stable in May.  

In this month, a lot of domestic insecticide manufacturers are reported to be affected by the shortage of power supply in China. With the increasing production cost and relatively stable market prices of insecticides, the profit of insecticide manufacturers in China is further squeezed. Some insecticide manufacturers like Jiangsu Laike and Ganzhou Wenong are not affected greatly as they are busy with the overall relocation.  

It's estimated that more insecticide manufacturers will carry out overall relocation and move into chemical industrial parks in the future, which is indicated again in the recent-released Development Plan of Pesticide Industry in the 12th Five-Year Plan Period. In the plan, cleaner production, mergers & acquisitions, chemical industrial parks and green pesticides remain the key words, which are in line with that in Pesticide Industry Policy released on 19 Sept. 2010.

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