Actual output of Abamectin,EMB lower than nominal capacity, overall price level going up

The price of Abamectin and Emamectin Benzoate(EMB) has been on the rise since this February, some of the manufacturers are running at low load and spot goods are not readily available, whist downstream buyers actively inquire about pricing. Suppliers are mainly making delivery for purchase orders of early dates placed from South American market, delivery of which may be scheduled till early November. This article analyzes the reasons of the tight supply and tries to predict the market trend.

Cost Structure 

Cost of abamectin comprises coal, corn starch and toluene; the price trend of the three products are respectively shown in the following: 

Corn starch price trend

Since the 2nd half of the year, the price of corn starch has slightly declined by 4%, which somewhat rises last week, staying at about RMB2,700 yuan/ton.

Toluene price trend

                                                       Toluene production price in China (May 4 – Aug 2 2024)

                                                       Quality: Premium grade

Since the 2nd half of the year, the price of toluene has declined from RMB7,580/ton down to RMB7,390/ton, which is a 2.5% slight decrease.

Coal price trend

The price of thermal coal remains for long at RMB801.4 yuan/ton, which has no impact on the cost of abamectin. Overall, the cost of abamectin stays largely stable. 

Optimistic market demand 

(1) Domestic market

By June 2024, ICAMA granted registration of 796 abamectin single formulations and 1,129 abamectin mixtures. From 2020 to June 2024, 28 single formulation registrations and 99 mixtures registrations were newly granted. Concerning EMB, 637 single formulation registrations and 511 mixture registrations were granted. From 2020 to June 2024, 35 single formulation registrations and 156 mixture registrations were newly granted. 

In particular, as chlorantraniliprole comes off patent, also for the reason of the development of its high resistance, the market demand for mixtures of AIs like EMB with chlorantraniliprole has increased to certain extent, especially the needs to control rice leaf roller in the rice producing regions, where the resistance appears low to moderate. Accordingly, the chlorantraniliprole + EMB mixture registrations increased rapidly from 2023 to 2024, with grant of 29 and 14 registrations respectively, a strong driver to the growth of abamectin and EMB.

(2) International market

China has today become the world’s largest producer and exporter of abamectin and EMB, which are being exported more than 180 countries for supply to the whole world. The inventory management in 2023 was quite satisfactory, with steady growth of exportation. For instance, in the Indian market, grant of EMB registration has been increasing, where demand for technical material exceeds 1,000 tons, whilst the global demand for abamectin is nearly 5,000 tons of technical material as converted and above 3,500 tons of EMB.

Production load not at high side, with tight supply

(1) Selling price dropping away from cost, production forced to shut down

In January 2024, the ″destocking″ process resulted in a serious ″involute competition″ which once led to the price fall of abamectin and EMB down to the bottom, when abamectin price fell to RMB350,000 yuan/ton while EMB price fell to RMB490,000 yuan/ton, which is a historical low level. In addition, the sales price was lower than cost, forcing some manufacturers to shut down part or all of their production lines. These two products have experienced an evolution of market operation, which used to be a market of many industry players, now dropping down to a market with only a few industry players. 

Since this February, as the production run is not high and the season of pesticide application is drawing near, the market demand has gradually increased and the prices of the two products began to pick up. At present, the prices of the two products remain stable and are even going up slightly and steadily.

(2) Equipment under maintenance, production shut down partially 

Since July and August, the upstream technical material manufacturers have gradually started summer maintenance and started to shut down production again, resulting in a situation of no-full-load production, which will still continue. According to a research, the current actual output of abamectin is far less than nominal capacity, running at only about 70% of the nominal capacity in the first half of the year, whilst the production of EMB is only 40-50% of the nominal capacity.

This year, the insufficient production load run has been the most critical factor affecting the prices. 

(3) Purchase order backlogging, delivery to be scheduled 

The demand side of abamectin looks stable. As downstream buyers are sending a lot of inquiries, the suppliers are also making effort to schedule production and delivery. At present, the main focus is on delivery of goods ordered in the early stage from South American buyers. It is reported that some of the suppliers are scheduling date of shipment till early November. Because the spot supply of EMB is tight, manufacturers have difficulty in taking new purchase orders. The downstream market demand appears positive, where buyers are active in placing purchasing orders. The fermentation-based manufacturers, as impacted by their nature of production, still need some time to resume the production which is previously shut down. Within a certain period of time, prices may remain adjusted or may rise.