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An overview of companies manufacturing active ingredient in China

CCPIA April. 2011

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Part I China Supply Overview

● There are about 1,800 pesticide companies in China, but only about 450 manufacture

active ingredients.

● Top products exported: diazinon

Chlorpyrifos2,4-D

ImidaclopridAbamectin

Methylaminoavermectinlambda-cyhalothrin

FenitrothionDimethoateCarbofuran

ProfenophosCypermethrin

Cartap

aluminium phosphideAcetamipridGlyphosate

ParaquatAtrazine

ClopyralidDicambaAmetryn

ClethodimMetribuzin

metolachlorMancozeb

TebuconazoleCarbendazim

ChlorothalonilPropiconazol

Gibberellic acidEthephon

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Major factors influencing the market:

● Preferential benefits granted by the Central Government to agriculture-related companies.

● Pesticide’s export tax rebate rate rebounded from 5% back to 9%, 11% and 13%;

● Access to inexpensive raw materials and labor continues to benefit Chinese producers.

● Introduction of working groups for major actives formed in 2010 to regulate supply.

● Since 2006, application for emulsion concentrate (EC) will not be accepted for a new facility.

● Since 2007, sale and application of five organophosphorus insecticides (methamidophos) have been totally banned.

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Total Pesticide Production (Thousands of tones)

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Total Chinese Pesticide Production By Class(Thousands of tones)

■Insecticide ■Herbicide ■Fungicide

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Total Chinese Pesticide Export Volume (Thousands of tones)

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Total Chinese Pesticide Import Volume (Thousands of tones)

Source: China Crop Protection Industry Association (CCPIA)

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Total Chinese Pesticide Export Value($ millions, USD)

Source: China Crop Protection Industry Association (CCPIA)

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Top 10 Export Markets, 2008Insecticides ($ millions)

14151515161922

3439

47

05101520253035404550

Vietnam Pakistan Thailand UnitedStates

Korea Indonesia Japan Philippines SouthAfrica

Ukraine

Source: China Crop Protection Industry Association (CCPIA)

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Top 10 Export Markets, 2008Fungicides ($ millions)

6.87.27.78.28.59.810.611.811.8

25.9

0

5

10

15

20

25

30

Vietnam Thailand Indonesia Ukraine Bengal Brazil UnitedStates

Turkey Belgium Colombia

Source: China Crop Protection Industry Association (CCPIA)

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Top 10 Export Markets, 2008Herbicides ($ millions)

41.943.143.244.845.753.361.364.2

117.6127.1

0

20

40

60

80

100

120

140

UnitedStates

Thailand Ukraine Australia Russia Indonesia Vietnam Uruguay Israel Nigeria

Source: China Crop Protection Industry Association (CCPIA)

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Prediction on future market

● Land reform will drive greater consumption of pesticides domestically.

● More rigorous environmental requirements for manufacturing facilities and subsidies or very inexpensive loans will drive consolidation.

● Industry-sponsored working groups aim to stabilize supply of key actives (glyphosate, imidacloprid, paraquat, abermectin, 2,4-D).

● Rebate programs are intended to create more branded formulations for export versus technical actives.

● Greater interest in fungicides to insulate product portfolios from price fluctuations.

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Part II Latest Policies

1. Pesicide Industry Policies (Issued in August 2010)

2. Restricted & Banned: 21 Highly Toxic Pesticides

3. To Be Cut Down: Emulsifiable Concentrate Products

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4. Pesticide Management Ordinance Amendament

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Background

★The current principles/policies are not complete and

contradicted with other policies. Some of them are outdated.

★ Several important problems:

Redundant Projects

Inappropriate Labor Division

Insufficient Innovation

Slow-paced Pollution Control Technologies

Under such circumstances, a whole set of practical principles/policies

which can be used as guidance are required immediately and they are

vital to enterprises and governments.

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1. Pesicide Industry Policies (Issued in August 2010)

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Objectives

1.To optimize industrial layout and reduce pollution: 50% TC enterprises

shall move to the established industrial areas.

2.The number of China's pesticide companies would be cut by 30 % by

2015; the revenue of Top 20 largest pesticide companies would account for

50% of the industry's total revenue by 2015.

3.By 2015, money spent on R&D of 10 largest companies would account for

3% of the annual total revenue.

4.By 2015 the pesticide industry would decrease waste gas, water and

industrial residues by 30%, and increase by-product recycling by 30%.

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1. Pesicide Industry Policies (Issued in August 2010)

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Impact on Pesticide Industry

（ 1 ） Industrial Structure

★ To promote M&A, reorganization to achieve intensive mass production;

★ To optimize labor division in the industrial chain: led by TC enterprises;

★ To promote the industry to become more intensified, professional with

its own characteristics

（ 2 ） Top Enterprises

★ To adjust the related laws and regulations to promote top enterprises

to reorganize factors of production and use one unified brand for their

parent companies, joint stock companies, affiliated companies, M&A

enterprises;

★ To support top enterprises to enlarge /expand their market and

develop their main products in different regions;

★ To help to direct more social resources to top enterprises to be larger

1. Pesicide Industry Policies (Issued in August 2010)

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Impact on Pesticide Industry

（ 3 ） Intangible Assets

★ Abided by legislations, to promote the transfer of intangible assets

such as intellectual properties, pesticides registration materials.

e.g. We shall support the enterprises with certifications for the same

products to sub contract for each other.

（ 4 ） Technical Products

★ To promote the combination of the process of production and sales and

establish records/files to track TC products ； To promote the cooperation between TC enterprises and EC enterprises

via the product chain and the creation of brands together

1. Pesicide Industry Policies (Issued in August 2010)

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Impact on Pesticide Industry

（ 5 ） Withdraw Mechanism

★ To help enterprises, which are not qualified to produce with

their outdated equipment, and are not environmental friendly, to

withdraw the market via compensation polices and other measures.

（ 6 ） Non-agriculture Purposes

★ To quicken marketing research for non-agriculture purposes

and to explore the pesticide products and technologies that have

the market potential in the hope of broadening the application of

pesticides in different market.

1. Pesicide Industry Policies (Issued in August 2010)

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Impact on Pesticide Industry

（ 7 ） Brand Construction and Label Management

★ To improve brand construction and label management to

upgrade the production level and market supervision

（ 8 ） Pesticide Products

★ To promote highly effective, safe and environmental friendly

pesticide products; to explore and utilize the new products, new

species and technologies as well as bio-pesticides

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1. Pesicide Industry Policies (Issued in August 2010)

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2. Restricted & Banned: highly toxic pesticides

2020

Hainan Province: toxic

cowpea incident

2020

Strengthening regulations on pesticides market;

Cracking down on illegal production, sale and usage;

Instructing farmers how to use it appropriately

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1 农药工业产业政策

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2. Restricted & Banned: Highly Toxic Pesticides

fenamiphos fonofos phorate

phosfolan-methyl

isofenphos-methyl

carbofuran

methomyl aluminium phosphide

calcium phosphide

megnesium phosphide

zinc phosphide

cadusafos ethoprophos methidathion

isocarbophos terbufos aldicarb

methyl bromide omethoate sulfotep

21 highly toxic pesticides are to withdraw from the market are listed below:

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★ These highly toxic pesticides shall be restricted gradually. A temporary respite

shall be given to those pesticides that are needed for agricultural production but have

no better alternatives.

——restrict expansion, speed R&D of new substitutes

★ A time span of 3 to 5 years and support shall be given to relevant

enterprises for developing new products and product restructuring.

★ Crop protection departments should guide on the safe and scientific

use of pesticides

2. Restricted & Banned: highly toxic pesticides

It is beneficial from a long run perspective to withdraw highly toxic

pesticides from the market, however, under certain circumstances,

exception should be given.

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3. To Be Reduced: EC

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A Solid Fact: EC products have been polluting the environment

It is the tendency to gradually reduce EC products and replace them

with environmental friendly alternatives for the sustainable

development.

Reducing EC products involves many EC species

and has the influence in a wide range

Key Issue: solvent pollution, waste of resources

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Three Steps for EC Products Reduction

No more new EC production enterprises have been

approved since July, 1st, 2006.

Production certificates have been no longer

released for newly applied EC products since

Aug.1st 2009.

Except for some products that only can be produced in the form of EC, the

production of EC products using the solvent such as benzene, methylbenzene,

dimethylbenzene, etc. shall be stopped in an appropriate period.

Finished

Strong feedback

3. To Be Reduced: EC

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Suggestions

1 、 For the species having mature technologies, eco-friendly formulation

nationwide, there shall be no new certificates for EC formulation.

2 、 For those products which currently can produce EC formulation only,

we suggest continue the procedures for releasing certificates.

3 、 For those enterprises which can produce EC formulation by using low

volatile and eco-friendly solvent after test, they are required to use other

solvents to replace terphenyl.

4 、 To provide financial aid for the technology transformation

programs ,which produce eco-friendly formulation or use eco-friendly solvent

to produce pesticides.

Different Measures For Different Situations

3. To Be Reduced: EC

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4. Pesticide Management Ordinance Amendament

Key points considered:

Cancel the temporary registration

Focus on ecological and environmental security

Strengthen the sales and use management

Refinement of the penalties for violations

Background: July 2010, MOA took the lead to amend the currently most effective pesticide management laws, – "Pesticide Management Ordinance" and has entered into period of the second revision of comments now.