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Analysis: China 2011 pesticide industry unlikely to boom on overcapacity

Friday, January 7, 2011 3:06 AM

BEIJING, Jan. 7, 2011 (Xinhua News Agency) -- China's pesticide industry has little chance to boom this year in consideration of its surplus production capacity as well as sluggish demand from downstream industries.

Pesticide price hikes since the fourth quarter of last year have triggered market expectation for a bull year of pesticide industry in 2011. However, such expectation may fail to come true due to unfavorable fundamentals.

In the September to December period of 2010, prices of staple pesticide were 10 to 20 percent higher than a year earlier despite slack marketing season, and 70 percent to 80 percent of the staple products posted a rise in prices.

However, pesticide industry's profitability wasn't improving along with price hikes because of rising prices of raw materials and labor cost.

Furthermore, severe overcapacity is a key reason to drag pesticide industry into plight in the past three years.

In the first 10 months of last year, domestic pesticide output reached 2.23 million metric tons (tonnes), nearly hitting the level in the full year of 2009. By the end of November, pesticide enterprises' stocks had arrived at 9.99 billion yuan in value, up 4.23 percent year on year.

Meanwhile, pesticide demand has been growing slowly. The National Agro-Tech Promotion & Service Center forecasted that China's pesticide demand will increase 2.69 percent this year.

Liang Bin, a researcher with CITIC Securities Co., said that pesticide industry has passed the rapid growth period, and the demand has limited room to rise given normal weather conditions as well as absence of new varieties.

Analysts note that the pesticide sector may rally for some period if warm winter and widespread insect plague occur, adding that risk is still high in investing in this sector which has heavy stock pressure. (Edited by Liu Xiaoyun, liuxy08@xinhua.org)

(Source: )
(Source: Quotemedia)


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