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. Export volumes increased while prices fell, total output declined slightly, and product prices dropped sharply. In response to these challenges, the industry proactively addressed multiple market risks and uncertainties, striving to maintain a balance of stability amid progress and to use growth as a driver of 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, a surge in 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 bolster stability.

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Economic Performance of China’s Pesticide Industry in 2023

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

1.1 Profits continued to decline, but the rate of decline 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 be negative, with the decline widening. Although the year-to-date drop in main business revenue narrowed after August, the reduction in profit declines was not significant. By the end of December, the number of loss-making enterprises above designated size had increased by 42.2% year on year, while the aggregate amount of losses rose by 163.8% compared with the same period last year—28 percentage points higher than the figure recorded 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. Consequently, pesticide prices continued to fall, weakening the industry’s profitability and driving 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 product category, insecticide production increased by 4.88% year on year, while herbicide and fungicide output decreased, falling by 2.81% and 3.06%, respectively. Table 1 shows that among products with annual output exceeding 10,000 tons, the raw‑material production of 13 active ingredients—including glufosinate, acephate, thiamethoxam, lambda‑cyhalothrin, carbendazim, and metolachlor—rose year on year, whereas the raw‑material output of 15 others—such as ethephon, atrazine, paraquat, and pendimethalin—declined to varying degrees. In addition, several high‑demand products, including chlorantraniliprole and prothioconazole, have seen rapid production growth as capacity comes online. Overall, despite mounting supply‑demand imbalances and subdued 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; however, they remained higher than in 2020 and 2021. Examining the rate of decline in monthly export volume and export value (Figure 2), last year’s pesticide export trade followed a pattern of initial growth, followed by a downturn, and then a rebound. Starting in the second half of the year, the declines in both export volume and export value narrowed markedly, with export volume posting notable year-on-year growth—indicating, 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 but stagnant or declining profitability. 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 fluctuations, it continued to decline, with the downward trend becoming particularly pronounced by the end of 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 and a continued downward trend in the fourth. Based on CAPI data over the past three years, the current cycle of rising pesticide prices—spurred 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 escalating 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 Pass to the East and Heading West” trends are 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 that disrupt 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 presence in western China, with ongoing investments in plant construction. Efforts to expand into overseas markets and establish manufacturing operations abroad also remain active. Compared with 2022, the number of enterprises and individuals participating in agrochemical‑related investments grew significantly in 2023. According to incomplete statistics, more than 100 new projects aimed at producing active ingredients were planned for 2023, covering 173 distinct active‑ingredient varieties; full commissioning of these projects is expected to add approximately one million tonnes of capacity. Notably, several high‑demand products—such as chlorantraniliprole, prothioconazole, and glufosinate‑ammonium—are seeing substantial increases in production capacity.

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 revenue profit margin of large-scale enterprises across the sector stood at 6.2%, marking the lowest level in the past decade—far below the 13.1% recorded in 2022 and the 8.9% in 2021, both during the 14th Five-Year Plan period. Average corporate profits also hit a ten-year low, while 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, indicating 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 imperfect; 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 companies 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 accelerate 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—leading to 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; industrialization remains limited; 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 bottleneck technologies, strengthen existing strengths, address weaknesses, and bolster 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, secure supply of key food commodities, the agrochemical industry remains indispensable. 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 nature of agrochemicals has remained 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 supplies 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 and, through technological innovation, green manufacturing, and smart manufacturing, accelerate the development of new‑type productive forces. By exploring new technologies, business models, and services, it should drive the transformation and upgrading of the sector, strengthen its core competitiveness, and jointly pursue high‑quality industry development.

Source: China Pesticide Industry Association