China's Pesticide Industry Faces Escalation Pressure
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According to the China Chemical News report on November 15, the National Development and Reform Commission and the General Administration of Customs separately announced that the major industrial industries in the first three quarters of operation and import and export shows that China exported 308,000 tons of pesticides, worth 800 million US dollars, respectively, compared to the same period in 2005 ( The same below) decreased by 3.5% and 24.2%; imports were 31,000 tons, a year-on-year increase of 13.3%. This is the first time since 1997 that the total amount and total value of China’s pesticide exports have experienced negative growth. Authoritative sources in the industry reminded that the increase or decrease in the import and export of pesticides shows the pressure for industrial upgrading of pesticides in China.
Small scale and low industry concentration Historically, China's pesticide industry policies have been relatively loose, barriers to industry entry are low, and low-level redundant construction and overcapacity are serious. The sales of 8 major pesticide multinationals in the world accounted for about 80% of the total global sales of pesticides, while nearly 2,000 were pesticide production companies in China. Even if the sales revenue of pesticide products in listed companies is the largest, it only accounts for about 3% of national sales revenue. The industry concentration is very low. This leads to disorderly competition in the domestic pesticide market, which directly affects the economic efficiency of the enterprise. The poor economic strength of a single pesticide company also results in low investment in research and development of new drugs. The entire industry is always in a vicious circle of product homogeneity and price competition.
According to statistics, there are less than 200 2,000 tons/year of original drug manufacturers in China, and only 14 companies have pesticide production above 5,000 tons, and only 4 have output above 10,000 tons. Compared with foreign multinationals, domestic pesticides have a wide disparity, regardless of their size or market share.
The policy environment has become increasingly severe. The Chinese government reduced the proportion of some pesticide export tax rebates at the end of 2005. In September 2006, the export tax rebate policy for pesticides that have been included in the PIC and POPs Conventions was lifted. The Ministry of Commerce, the General Administration of Customs and the State Environmental Protection Administration have recently drafted a new batch of banned commodity catalogs for processing trade. The pesticide products in the catalog account for a large proportion and have an impact on the export of pesticide varieties.
Low product quality pass rate According to the results of the 2005 National Pesticide Quality Supervision and Inspection Center, the pass rate of pesticides in China is low, which is 80%. To open up the international market, only by relying on marketable high-quality pesticide products, to keep the domestic market, expand market share, it is possible to make our products go abroad. Product quality has become a key factor in the rise and fall of China's pesticide industry.
Weak financial strength and financing difficulties Multinational corporations have strong financial strength and can finance abroad through multiple channels. Relatively speaking, the financing of China's pesticide companies is relatively difficult, even if it can be very limited financing, many companies lack the ability to transform, the results are all done on one level, short-term rapid project proliferation, can not be long-term development.
Poor core competitiveness, vicious competition The development trend of the world's pesticide industry is toward the direction of “large-scale, centralized, and monopolizedâ€. However, there are more than 2,000 pesticide plants in China. However, there are few small plants in large factories that are blooming everywhere. Numerous domestic manufacturers are not prominent in their main business, their core competencies are poor, they desperately seek medical care, and they compete for cakes by means of unfair competition such as “decreasing content, more than one product, expanding registration, and forging datesâ€. On the other hand, lack of market management, many agricultural law enforcement teams have no funding, the mechanism is not perfect, the regulatory power is weak, can not effectively manage the pesticide market.
The backwardness of the mechanism and the restriction of competitiveness in the use of multinational corporations have established a modern enterprise system with clear property rights and operability. However, even if some of our traditional pesticide manufacturers are listed, it is still difficult to get out of the old management model, even if it is operational. The more standard enterprises also retain the traces and imprints under the traditional management mechanism. Such a mechanism restricts the exertion of corporate competitiveness.
Many people believe that foreigners do not understand the Chinese market. In fact, multinational corporations have already solved this problem. For example, they use high-paying Chinese talents who are expected to pay for themselves, are willing to spend money on purchasing information, and establish effective information channels and rapid response decisions. Pipelines, by contrast, are often lagging behind our local response to the market, often delaying business opportunities at key moments due to lack of a decision.
Unbalanced Management and Restriction of Business Growth At present, the management experience, management tools, and management talents of domestic pesticide companies are facing challenges. Market management and internal management are all at the middle and upper levels. As the price of pesticides dropped again and again, circulation was not profitable, losing the role of the reservoir, many companies gloomy business, most pesticide companies do not attach importance to basic management and brand management, quick success, shortsighted, leading to management imbalances, in the end Instead, it restricted the growth of the company.
Lack of technological innovation capabilities and branded products Most multinational corporations have strong research and development institutions that invest 15% to 20% of sales each year to develop “home-based†products with intellectual property rights. Domestic pesticide companies' product innovation capability and level and processing methods are quite different from those of multinational companies. Domestic pesticides lack intellectual property rights and can only be copied behind others. Even if they are export products, they are mostly on the international secondary and tertiary markets. Appeared, this makes our country's pesticide industry almost no ability to develop innovative varieties, always lagging behind the developed countries of pesticide technology.
In order to realize the long-term sustainable development strategy, enterprises must take the concept of environmental protection as the guiding ideology of business, adopt the concept of green culture, eliminate and reduce the destruction of the ecological environment as the center, and meet the green consumption as the starting point to implement the green revolution. At present, many domestic companies do not have environmental awareness, and at the expense of the environment to increase production and economic efficiency.
UnionPay analysis:
The pressure of industrial upgrading indicated by the change in the number of pesticide export trade has already been emphasized by the industry. Judging from the current situation, the pesticide industry is facing a shift from low-quality, low-capital labor input ratios to high-quality, high-capital labor input ratios. UnionPay believes that with the emphasis on food safety in domestic laws and regulations and the improvement of agricultural production technology, the demand structure of pesticide products in China will change significantly in the coming period.
Judging from the classification of pesticides, UnionPay believes that commercial banks should provide loans to pesticide companies that have low toxicity, are environmentally friendly, and have great development potential in the future, such as pyrethroids, carbamates, and biological pesticides. From January 1, 2007, five highly toxic organophosphorus pesticides such as methamidophos, methyl parathion, parathion, monocrotophos, and phosphoamine will be banned in China. The use of these five pesticides and preparations accounts for about 25% of the total use of pesticides. The withdrawal of such varieties will leave a great alternative space for new low-toxicity and environmental pesticides, and expand production for some powerful companies in the short term. Scale and market share provide historic development opportunities. More than 15 kinds of pesticides such as avermectin, chlorpyrifos, insecticides, cyfluthrin, imidacloprid, acephate, chloramphenicol, triazophos, profenofos, and furanoic acid hydrazide have become alternative pesticides. Banks Due consideration may be given to the feasibility of these projects.
From the point of view of related companies in the pesticide industry, banks can consider some high-quality listed companies, including Yangnong Chemical, Hong Sun, Hunan Haili, Shengli Shares, and Qianjiang Biochemical. Sandronda, which has greater advantages in related alternatives, will also have better development prospects.
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