Pesticide Industry Faces Great Adjustment

The new environmental protection law has been implemented since January 1 for 2 months. With the introduction of various detailed policies formulated by the new environmental protection law, the pesticide industry is becoming one of the most undermined industries under the new environmental protection law. According to the introduction of Hunan Provincial Pesticide Industry Association, affected by local environmental policies, this year, the province's five pharmaceutical companies including Hengde Ryde, Zhuzhou Bonghua, Jingxi Xianglong, Yueyang Depu, and Linxiang Huanong were discontinued. The rate accounted for 33% of the province's original drug manufacturers. It is understood that the phenomenon of production stoppages of pesticide-based pharmaceutical companies is also common in major provinces such as Jiangsu and Shandong. All indications indicate that the pesticide industry will usher in major adjustments this year.

Hu Changdi, vice chairman of the Hunan Pesticide Industry Association, said that due to the relatively low technical barriers in the pesticide industry, many companies have flooded into the industry in previous years, making the industry’s overall oversupply situation very clear. This has led to a long-term decline in product prices. In 2014, affected by multiple factors such as market, production capacity, and environmental protection, the total profit of 843 enterprises above designated size in the pesticide industry across the country was 22.592 billion yuan, a decrease of 1.2% from the previous year, which was the first decline in nearly 6 years. Hu Changdi believes that in the past, many companies did not consider the cost of environmental protection, and their investment in environmental protection was far from enough, making it difficult to adapt to the stringent requirements of the new environmental protection law. Under the regulatory requirements of the new environmental protection law, some companies cannot afford high environmental protection reforms and governance costs. Some enterprises that do not meet the standards will not be able to obtain production permits. Therefore, many small-scale enterprises will be forced to suspend production and may even withdraw from the pesticide industry.

In fact, from the second half of last year, local governments have introduced more stringent environmental protection measures in light of specific conditions. The environmental protection pressures faced by the pesticide industry are increasing. For example, since the implementation of the new environmental protection law, Hunan Province has repeatedly made heavy fists on environmental pollution. Starting from January 1, the Hunan Provincial Environmental Protection Agency carried out a one-year investigation of environmental risks within the province. It will make full use of the legal provisions of the new environmental protection law and impose top-level punishment on illegal polluters.

The Jiangsu Provincial Pesticide Association revealed that this year's Jiangsu Provincial Department of Environmental Protection, on the basis of drawing on last year's environmental verification experience in the glyphosate industry, has issued environmental protection verification measures for the entire pesticide industry. It is said that the strength of this environmental verification system is greater than that of glyphosate, and that it is a leak-proof investigation. At present, there are more than 200 pesticide companies in Jiangsu Province. It is expected that about one quarter or more of the enterprises will be restricted after the verification is completed and they are unable to declare new projects due to difficulties in meeting environmental verification requirements. Some companies will face production suspension and rectification and some pesticides. The variety of production capacity is further reduced. Shandong, Zhejiang and other provinces that produce large amounts of pesticides have indicated that they will fully follow up and impose more stringent environmental supervision on pesticide production enterprises.

The over-enhancement of environmental protection policies in various places is becoming a “double-edged sword” for the pesticide industry. On the one hand, it requires manufacturers to increase their environmental investment and increase their production costs. On the other hand, it eliminates outdated small companies that cannot meet environmental standards and frees up market space for law-abiding enterprises. The current "double-edged sword" effect has emerged. Entering 2015, the number of pesticide companies that have ceased production in various regions has increased significantly, and production capacity has dropped significantly. Correspondingly, there has been a phenomenon that individual products are in short supply. The Hunan Nanometer Pesticide Industry Technology Innovation Alliance expects this trend to continue for a long time this year.