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The Chinese AgroChemical Market Presents Great Opportunities



AgroChemicals

Overview

China's agricultural chemical market has been the subject of great attention, and one of
the biggest agro-chemical consumers and a large agro-chemical importer. Agrochemical
exports to China ranked as the top destination for U.S. fertilizer exports until
2003. In the first eleven months of 2005, China imported $414.55 million in fertilizers
and $32.27 million in pesticides from the U.S., accounting for 14.79% and 19.63% of
total imported fertilizers and pesticides respectively. U.S. DAP (Diammonium
Phosphate) has a strong position in the China fertilizer market. By the end of November
of 2005, 45.78% of China's DAP imports came from the United States. China's goal is
to rely less on fertilizer imports in the future, but domestic output cannot meet the total
market demand, forcing China to import high-concentration and compound fertilizers.
The import of such fertilizer is still controlled by a quota management system.

China's accession to the WTO provides benefits to U.S. fertilizer exporters. On
accession, tariffs dropped 6% from the 11% import duty rate. In October 2005, China's
Ministry of Commerce (MOFCOM) released the 2006 fertilizer import tariff rate quotas
(TRQs). The total 2006 TRQs will be 3.3 million tons of urea imports, 6.9 million tons
of diammonium phosphate (DAP) and 3.45 million tons of NPK compound fertilizers.
Of the TRQs, 2.97 tons of urea, 4.49 million tons of DAP and 2.24 million tons of NPK
are for state trading while non-state trading TRQs will be 330,000 tons of urea, 2.41
million tons of DAP and 1.21 million tons of NPK. The import volumes within the
quota are levied an import duty of 4%, while imports exceeding the quota are levied a
duty of 50%. Perhaps most significant, foreign firms will gain the right to import and
distribute fertilizers after a five-year transition period after 2006, gradually dismantling
the state-controlled trading monopoly, setting the stage for greater market access for
U.S. suppliers.

In the last several years, the U.S. has held the No.1 position among pesticides
exporters to China. China is taking measures to regulate the pesticide market to
prevent toxic runoff and alleviate risks of consumer poisoning. The proportion of
herbicides and fungicides within pesticides production has increased. The proportion of
output of the pesticides featuring high performance, low toxicity and better safety
characteristics has also increased. Imports of high efficiency, low toxicity, and low
residual pesticides have strong market prospects, mainly as an alternative to highly
toxic Chinese pesticides. However, foreign suppliers currently face discriminatory
product testing requirements.


Fertilizer
Local producers have yet to meet the growing local market demand, especially for
phosphate and potassium fertilizer, which are limited natural resources. China still must
rely on importing fertilizers in large quantities.
* Nitrogen fertilizer
* Phosphate fertilizer
* Potash fertilizer

Pesticides
High efficiency, low toxicity pesticides have strong market prospects. Although
domestic output of pesticides satisfies local demand in most areas, domestic production
of high efficiency herbicides, high-efficiency and low-toxicity insecticides, and
fungicides cannot meet the demand both in terms of quantity and quality. Some raw
pesticides and intermediates rely on imports, such as aniline with o-dihydroxybenzene,
furphenol and tripoly-nitrogen-chlorine dialdyl. China aims to curtail the application and
production of highly-toxic pesticides, especially organo-phosphorous biocides, since the
high-toxic pesticides take up about 36% of the country's total consumption.
* Herbicides
* Environmentally safe insecticides
* Biopesticides
* New technologically advanced pesticides
* Because the Chinese government now emphasizes environmentally sound
technologies, pesticides will have to meet new requirements.




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