For the first time in more than 30 years, China’s pesticide industry has seen a simultaneous decline in both revenue and profits.

Abstract: In 2023, China’s agrochemical industry recorded negative growth in both revenue and profits—the first simultaneous decline in over three decades—while export volumes increased but prices fell. Total output declined slightly, and product prices dropped sharply. In response to these conditions, the industry proactively addressed multiple market risks and challenges, striving to maintain a balance of stability amid progress and to use growth as a means of reinforcing stability. Looking ahead, the sector is expected to see a stabilization and recovery in its overall economic performance in 2024, with prospects for an overall improvement.

2023 marked the inaugural year for fully implementing the spirit of the 20th National Congress of the Communist Party of China, as well as the first year following the smooth transition from three years of pandemic control. The global agrochemical market remained under sustained pressure, with weak demand, the gradual release of additional large-scale production capacity on the supply side, and intensifying competition. In China, the pesticide industry as a whole entered a downward trajectory, with both operating revenue and profits declining for the first time in over three decades; export volumes increased while prices fell, leading to a substantial drop in product prices. Faced with multiple adverse factors—including a sluggish global economic recovery and growing complexity and uncertainty in the external environment—the Chinese pesticide sector proactively addressed mounting risks and challenges, striving to maintain a balance between stability and progress and to use progress to reinforce stability.

1 

Economic Performance of China’s Pesticide Industry in 2023

According to data from the National Bureau of Statistics, in 2023, the agrochemical industry recorded a 17.0% year-on-year decline in operating revenue and a 62.2% year-on-year drop in total profits; total import‑export trade fell by 24.9% year on year, while the trade surplus decreased by 30.0% compared with the previous year. Specifically, export volume increased by nearly 10.0%, but export value declined by 27.2%; import volume fell by 2.3%, while import value rose by 1.9%. Among the two major segments, chemical pesticide manufacturing saw operating revenue down 16.6% year on year and profits plunge 61.6%; bio‑chemical and microbial pesticide manufacturing reported a 20.2% year-on-year decline in operating revenue and a 68.6% drop in profits. In 2023, the agrochemical industry experienced simultaneous declines in operating revenue, total profits, and export value.

1.1 Profits continue to decline, but the rate of decline has narrowed.

Data released by the National Bureau of Statistics (Figure 1) show that, in 2023, both the cumulative growth rate of main business revenue and the cumulative growth rate of total profits for enterprises above designated size continued to decline, with the magnitude of the decline widening. Although the year-to-date decline in main business revenue narrowed after August, the reduction in the profit decline was not significant. In terms of the extent of corporate losses, as of the end of December, the number of loss-making enterprises above designated size increased by 42.2% year on year, while the aggregate amount of losses expanded by 163.8% year on year—28 percentage points wider than in the first half of the year.

In 2023, influenced by macroeconomic conditions, cyclical industry fluctuations, and shifts in market supply and demand, the agrochemical sector experienced excessive channel inventories of active ingredients and intermediates, coupled with declining market demand and sustained price declines for pesticide products. These factors weakened the industry’s profitability and led to a downturn in overall performance. As of April 10, 2024, 35 listed companies in the pesticide sector had released their financial results—either preliminary reports or forecasts—among which 31 reported year-on-year declines in net profit attributable to shareholders, and 10 recorded losses.

1.2 Production declined slightly, highlighting the industry’s resilience.

According to statistics from the China Pesticide Industry Association, China’s total pesticide output (expressed in 100% active ingredient) declined by 2.18% year on year in 2023. By category, insecticide production increased by 4.88% year on year, while herbicide and fungicide output fell, with declines of 2.81% and 3.06%, respectively. Table 1 shows that among products with annual output exceeding 10,000 tons, the active‑ingredient output of 13 compounds—including glufosinate, acephate, thiamethoxam, lambda‑cyhalothrin, carbendazim, and metolachlor—rose year on year, whereas the active‑ingredient output of 15 others—such as ethephon, atrazine, paraquat, and pendimethalin—decreased to varying degrees. In addition, several high‑demand products, including chlorantraniliprole and prothioconazole, have seen rapid production growth as capacity has been brought online. Overall, despite mounting supply‑demand imbalances and persistently low prices, the industry has demonstrated considerable resilience.

1.3 Export trade is trending upward, and industry demand is rebounding from its trough.

In 2023, China’s pesticide export trade was influenced by product prices: while export volumes continued to grow, export value declined significantly. According to data from the National Bureau of Statistics, export volume increased by 9.8% year on year, whereas export value fell by 27.2% compared with the same period last year. Overall, both the total value of pesticide imports and exports and the trade surplus dipped below US$10 billion, down 24.9% and 30.0%, respectively, year on year—though they remained higher than in 2020 and 2021. Examining the deceleration in the year-on-year declines of monthly export volume and value (Figure 2), last year’s pesticide export trade followed a pattern of initial growth, followed by a decline, and then another rebound. Starting in the second half of the year, the rate of decline in both export volume and value narrowed markedly, with export volume posting notable year-on-year growth, suggesting, to some extent, a gradual recovery in market demand and emerging signs of revival in international markets.

1.4 Product prices have stabilized after a downward trend, with a weak consolidation following a bottoming-out rebound.

In 2023, the economic outlook was challenging: pesticide production declined slightly, and export volumes remained stable. However, industry revenue, total profits, and total exports all fell in tandem, reflecting a pronounced trend of rising sales without corresponding profit growth. The primary reason was the substantial price declines experienced by most pesticide varieties throughout the year. Figure 3 shows the Pesticide Price Index (CAPI), calculated on the basis of weighted average transaction prices derived from actual enterprise orders and published by the China Pesticide Industry Association. In January 2022, CAPI reached a nearly three-year peak; thereafter, amid ongoing volatility, it continued to decline through the end of 2023, with the downward adjustment proving particularly pronounced in 2023.

In the first half of 2023, driven by persistently weak market demand and elevated inventory levels, the price index plummeted from 135.04 in January to 87.52 in June, a decline of 35.19%. As short-term market demand modestly rebounded, the price index registered a brief recovery in the second half of the year, with a noticeable uptick in the third quarter followed by a continued downward trend in the fourth quarter. Based on CAPI data over the past three years, the current cycle of rising pesticide prices—triggered by multiple factors including the COVID‑19 pandemic, the dual‑control policy on energy consumption implemented in the second half of 2021, production curtailments and power restrictions, sharply increased production costs, and sustained growth in export demand—has largely come to an end. Product prices have largely returned to 2020 levels, with bulk pesticide prices, particularly glyphosate, having normalized; some products are now trading near cost. Overall, the industry remains in a phase of weak consolidation.

As shown in Table 2, among the 100 pesticide varieties under key monitoring, with the exception of a few months, more than 50% of the original‑product varieties experienced year‑on‑year and month‑on‑month price declines, while over 80% saw year‑on‑year price drops. Moreover, for several varieties, prices at the end of 2023 were more than 50% lower than in January 2022.

1.5 “Crossing the Passes to the East and West” trend is slowing, and industry investment is gradually becoming more rational.

Under the combined pressures of increasingly stringent safety and environmental regulations, higher准入 standards for chemical industrial parks, a complex and volatile international landscape with intensifying competition, and the rapid spread of extreme weather events disrupting production, the agrochemical industry continues to face mounting challenges. Nevertheless, as an essential sector and a pillar of agricultural production, agrochemicals remain attractive to external capital, which continues to flow into the industry, supporting its sustained growth. Looking at the state of the agrochemical sector in 2023, investment patterns have become more rational: companies in the central and eastern regions are prioritizing the development of new production facilities within local industrial parks, leading to a marked slowdown in the trend of “expanding eastward and westward.” Meanwhile, private capital from outside the industry is still increasing its investments in establishing plants in western China, while overseas market expansion and foreign‑based plant construction remain ongoing. Compared with 2022, the number of enterprises and individuals participating in agrochemical‑related investments rose significantly in 2023. According to incomplete statistics, over 100 new active‑ingredient production projects were planned for 2023, covering 173 distinct active‑ingredient varieties; full commissioning of these projects is expected to add approximately 1 million tonnes of capacity. Notably, several high‑demand products saw substantial capacity expansions, including chlorantraniliprole, prothioconazole, and glufosinate‑ammonium.

2 

Challenges Facing the Pesticide Industry

2023 was a pivotal year for the high-quality development of the agrochemical industry, yet it also proved to be an exceptionally challenging period. The current complex and volatile international environment poses multiple challenges to the sector’s pursuit of high-quality growth. Consequently, how to focus on industrial transformation and upgrading, drive technological innovation, and forge a path toward green development has become an urgent and pressing issue that the agrochemical industry must address.

2.1 There is significant room for improvement in industry profitability.

China is a major producer and exporter of pesticides; however, compared with developed countries and multinational corporations, the industry continues to grapple with weak core competitiveness and poor profitability. In 2023, the operating profit margin of large-scale enterprises across the sector stood at 6.2%, marking the lowest level in the past decade—far below the levels recorded in 2022 (13.1%) and 2021 (8.9%) during the 14th Five-Year Plan period. Average corporate profits also hit a ten-year low, while both the proportion of loss-making firms and the total amount of losses expanded year over year. Meanwhile, average current assets and notes receivable and accounts receivable increased compared with the previous year, suggesting that there remains considerable room for improving industry profitability.

2.2 The issue of overcapacity persists.

The pesticide industry has long grappled with a structural overcapacity dilemma—characterized by oversupply at the low end and shortages at the high end. After years of development, particularly since the 13th Five-Year Plan period, driven by national policies, adjustments to the industrial structure catalog, and a growing awareness of the need for transformation across the sector, China’s pesticide industry has achieved notable progress. Low‑level redundant construction has been effectively curbed, and the problem of structural overcapacity has been substantially alleviated. Nevertheless, the industry’s capacity‑allocation framework remains inadequately planned; in the past two years, bolstered by capital inflows, the expansion of active‑ingredient production capacity has intensified. Much of this investment has focused on scaling up and increasing output, while relatively little has been directed toward structural optimization, high‑end development, or product differentiation. Some enterprises have even exploited relocation or the construction of new production bases to further expand their capacity. Overall, the industry still needs to shift its development paradigm, explore targeted approaches to phasing out outdated capacity, and advance its transformation and upgrading.

2.3 Weak in-house R&D capabilities, with heavy responsibilities for innovating new products and processes.

In recent years, China’s pesticide industry has shifted from a reliance primarily on imports and imitation to a model that combines imitation with independent innovation. Significant progress has also been made in the research and development of new processes, novel formulations, and cutting-edge technologies—such as pesticide synthesis and biofermentation—marking substantial advances in pesticide‑related scientific and technological innovation. Nevertheless, critical gaps remain when compared with major multinational corporations in areas such as original‑source innovation, foundational theoretical frameworks, core manufacturing processes, and key intermediate‑synthesis technologies. Moreover, there is a lack of dynamic, collaborative mechanisms among industry, academia, research institutions, and end‑users; the level of industrialization remains low; and the standardization and regulation of application technologies are insufficient. These factors constrain the capacity for sustained innovation and the enhancement of international competitiveness. Over the coming years, it will be essential to focus on addressing bottleneck technologies, strengthening existing strengths while addressing weaknesses, and thereby elevating the sector’s core competitive edge.

3 

2024 Industry Forecast for the Pesticide Sector

2023 was a year marked by both difficulties and challenges. According to operational data, the agrochemical industry experienced its first simultaneous decline in both revenue and profits in over three decades. This trend underscores the mounting new obstacles and challenges while also highlighting the inherent volatility of the sector’s development. As a critical pillar for ensuring agricultural production and the stable supply of key food commodities, the agrochemical industry plays an indispensable role. With national food security elevated to a strategic priority at the level of overall national security and with continued increases in grain subsidies, the essential demand for agrochemicals remains unchanged, and market demand persists.

In 2024, although the industry will face an increasingly complex environment, overall it is expected to be a year of consolidation and stabilization, with domestic agrochemical companies also undergoing adjustments amid these challenging conditions. Based on a comprehensive assessment of domestic and international macroeconomic trends, as well as industry production dynamics and price movements, the agrochemical sector’s overall economic performance in 2024 is projected to stabilize and rebound, with prospects for broad-based improvement. The key supporting factors are as follows:

1) Pesticides are essential for national food security, and ensuring stable pesticide supply is crucial to safeguarding it.

2) According to forecasts by the National Agricultural Technology Extension Service Center, in 2024, 22 major pests and diseases affecting key food crops such as wheat, rice, corn, and potatoes, as well as oilseed and vegetable crops, are expected to re-emerge on a large scale, making chemical control indispensable.

3) The volatility of the international situation has prompted countries to place greater emphasis on food security, and international market demand is unlikely to decline.

4) Overseas companies are simultaneously destocking and restocking, which will boost the growth of pesticide exports.

In the face of new circumstances and challenges, the agrochemical industry must remain confident, leveraging technological innovation, green manufacturing, and smart manufacturing to accelerate the development of new‑type productive forces. By exploring new technologies, business models, and services, the industry can drive its transformation and upgrading, strengthen its core competitiveness, and jointly pursue high‑quality development.

Source: China Pesticide Industry Association