Summary: In mid-May, the average operating rate of Chinese glyphosate TC manufacturers fell to 64%. While most of the producers kept relatively stable production, others lowered the operating rate and even halted production due to decreased downstream orders, high upstream raw material costs, tightening environmental policies, and water and electricity crunch.

In May, there was a MoM decrease in the operating rate of Chinese glyphosate TC manufacturers. To be more specific, most of the producers said that they kept relatively stable production of glyphosate TC mainly to fulfil the pre-orders, leaving no extra ready stock to fulfil new orders. The traders didn't have glyphosate TC on hand either. However, the manufacturers didn't raise their operating rate when the price went up, but instead, rationally kept relatively stable production, and some of them even lowered the operating rate in early-to-mid April. It is worth noting that at a time of glyphosate TC shortage, domestic manufacturers may not necessarily get the pricing power. According to most of the glyphosate TC manufacturers, they were under pressure when the price was high and supply was tight. The reasons are as follows:

First, the producers have to remain cautious about releasing their capacity because the future demand remains unclear. Currently, the peak season for glyphosate TC has almost ended, with the number of new orders having dropped significantly. Plus, when the price remains high, foreign glyphosate TC buyers are mostly waiting and seeing. They make inquiries but don't place orders. Even if they do place orders, they are very cautious and in a stronger bargaining position than they did in the previous months. There seems to be an embarrassing trend in the glyphosate TC market--the products are priced high but don't sell.

Second, the high cost of raw materials is a constraint on the production of glyphosate TC manufacturers. The price of some raw materials went down in May, but that of the major raw materials, yellow phosphorus and glycine, remained high. Specifically, the domestic price of yellow phosphorus fluctuated at a high level in early-to-mid May. The price of glycine maintained an upward trend under pressure from its own raw materials. On the other hand, the price increase in glyphosate TC itself outweighed the increase in its raw materials, and therefore, the profit margin of glyphosate TC production seemed to go up. Seemingly, that was good news for the manufacturers. However, that was not the case in reality. The high price led to declining orders. High raw material costs, coupled with reduced orders, undoubtedly dampened the enthusiasm of glyphosate TC manufacturers. For example, Anhui Guangxin Agrochemical Co., Ltd. suspended the production at the end of April under the pressure of high raw material costs, and Nantong Jiangshan Agrochemical & Chemicals Co., Ltd. had to partially suspend the production due to raw material supply issues.

Third, tightening environmental policies and water and electricity crunch also restrict the production of glyphosate TC in some areas. Although glyphosate TC was in short supply, many manufacturers were unable to produce at full capacity due to tightening environmental policies and water and power rationing. In particular, in some areas in Sichuan Province with insufficient water and electricity supply, the glyphosate TC producers such as Sichuan Hebang Bio-technology Co., Ltd. and Fuhua Tongda Agro-chemical Technology Co., Ltd. brought down their operating rate.

Table Operating rate of major Chinese glyphosate TC manufacturers in May

Source: CCM

 You can find out more information at CCM Glyphosate China Monthly Report.

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