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Crop Protection China News

Vol.5 Issue 1. 2011 14 Jan. 2011

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Vol.5 Issue 1Crop Protection China News

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China Crop Protection

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Coming Reports from CCM:- Global Commercial Opportunities Derived from Glyphosate Industry- Production and Market of Azoxystrobin in China- Production and Market of

Pyrethroid Pesticides- Production and Market of Abamectin in China- Benzimidazole Fungicide Survey in China- World Outlook of Chlorpyrifos 2011-2015 - China Outlook for Mancozeb 2011-2016- Survey of Amide Herbicides in China- Triazole Fungicides Survey in China- Corn Herbicides Survey in China- China Rice Insecticides Survey - Acephate Survey in China - DETC Survey in China

Ready Market Reports:- Production and Market of Non Crop Pesticides in China - F u t u r e o f P l a n t G r o w t h Regulators in China 2010-2014

- Outlook for China Glyphosate Industry 2009-2014- Production and Market of Chlorpyrifos in China - Future Prospect of Genetically Modified Crops - Fluthiacet-methyl Survey in China - Seed Treatment Survey in China- Nicosulfuron Survey in China- Fertilizer Market in China- Glycine Survey in China- Fipronil Survey in China- MIPA survey in China- Seed Survey in China

CCM newsletters related to CP:- Insecticides China News- Herbicides China News- Fungicides China News- Glyphosate China Monthly Report

Content

■ Dynamic ...............................................................................................................1Pesticide companies in Zhejiang relocating capacity ............................................................................................1Overview: main pesticides situation in China 2010 ............................................................................................. 2

■ Company .............................................................................................................. 3Nantong Jiangshan to tide over glyphosate downturn by aid .............................................................................. 3Hebei Veyong to involve in DME industry ........................................................................................................... 3M&A: Lier Chemical and Jiangsu Kuaida ............................................................................................................. 4Jiangsu Tianrong to relocate ................................................................................................................................. 5

■ Financing ............................................................................................................. 6Anhui Huilong to launch IPO ................................................................................................................................ 6Jiangsu Limin won't get listed before Chinese Spring Festival of 2011 ............................................................... 7

■ Crops ................................................................................................................... 8China’s soybean import hits record high 2010 .....................................................................................................8Average market price of main crops in China (14 Jan. 2010) .............................................................................. 9Pest/disease forecast on rice in Jiangsu, 2011 ................................................................................................... 10

■ News in Brief ..................................................................................................... 10

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Welcome to Crop Protection China News 1101.

It is reported that China’s No.1 Document will still focus on agricultural issue in China. The document will enhance the water conservancy construction in agriculture to safeguard China’s grain production.

The first document of the year, dubbed "Number.1 Document" in China and jointly issued by the Central Committee of the Communist Party of China and the State Council, always states the future works that the government will attach great importance to during the year.

Although China’s grain production hits a record high in 2010, the grain produced by China itself still fails to meet the demand. China has to import more and more grain to fill the gap. China’s soybean import also hits a record high in 2010, with volume of 54.80 million tonnes. Besides, China imported a large amount of corn in 2010, the first time in recent years.

The prices of most crops witness huge increase in 2010. The prices of cotton, corn, wheat, soybean, etc., all record high peak in history. However, domestic peasants’ planting enthusiasm in China is rather low at present although prices of most agricultural commodities hit a record high.

Most peasants hold the view that they can earn more by working in cities than planting crops. Besides, the prices of agricultural production means such as seeds, pesticides, fertilizers, etc., increase faster than that of crops, which undermine a huge part of the profits.

To safeguard the food security in domestic market is estimated to be one of the priorities for Chinese government.

Headlines of Crop Protection China News 1101

More and more pesticide companies in Zhejiang Province have been relocating their pesticide

production capacities to other provinces in recent years.

Main pesticides’ demand in China witnesses steady growth in 2010.

Recently, Nantong Jiangshan is aided by local government and shareholders to get through the

downturn of glyphosate.

On 6 Jan. 2011, Hebei Veyong announces that its transaction with ENN Energy has been approved

by CSRC.

Lier Chemical and Jiangsu Kuaida’s M&A is approved by CSRC.

JiangsuTianrong starts to relocate recently.

Recently, Anhui Huilong, a large chain store company of agricultural materials, announces to

launch IPO in the near future.

Jiangsu Limin won't get listed before Chinese Spring Festival of 2011.

China imports 54.80 million tonnes of soybean in 2010, hitting a record high.

Location of key companies covered in this issue

RMB Exchange Rate, 14 Jan. 2011

100USA 659.89100EUR 876.91Source: The Bank of China (BOC)

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■ Dynamic

Pesticide companies in Zhejiang relocating capacity

Zhejiang Province is once the second important pesticide production base in China, but it has developed slowly in recent years compared with other important pesticide production bases such as Jiangsu Province and Shandong

Province. More and more pesticide companies in Zhejiang Province have been relocating their pesticide production capacities to other provinces in recent years due to the high production cost in Zhejiang.

According to CCM’s survey, over 15 pesticides companies have relocated part of their pesticide production capacities to other provinces. Besides, many other pesticide companies are planning to relocate in the near future.

Leading pesticide companies in Zhejiang, such as Zhejiang Wynca Chemical Industry Group Co., Ltd. (Zhejiang Wynca), Zhejiang Shenghua Biok Biology Co., Ltd. (Zhejiang Biok), Zhejiang Heben Pesticide & Chemicals Co., Ltd. (Zhejiang Heben), Zhejiang Jinfanda Bio-chemical Co., Ltd. (Zhejiang Jinfanda), etc., all have set subsidiaries in other provinces.

“Many Zhejiang pesticide companies have invested in other provinces in recent years, but no company from other regions invests in Zhejiang in the mean time.” reveals an insider from Zhejiang pesticide industry.

Pesticides companies in Zhejiang relocate pesticide production capacities to other provinces by building subsidiaries, cooperating with companies in other provinces, or acquiring other pesticide companies.

They mainly relocate their technical business to other regions and their plants in Zhejiang mainly produce pesticide formulations and part of pesticide technical.The high production cost in Zhejiang is the main reason for the relocations. As a relatively developed region in China, the requirement for environmental protection in Zhejiang is so strict that pesticide companies find it hard to meet the demand. Besides, the land cost is high in Zhejiang.

Different from Zhejiang Province, pesticide industry in Jiangsu and Shandong enjoys more support from the government. They have built many pesticide industry parks and encourage pesticide companies to relocate into them. The famous pesticide industry parks include Rudong National Industrial Park (Jiangsu), Weifang National Pesticide Industrial Zone (Shandong) and Rudong Yangkou Chemical Industrial Park (Jiangsu).

Besides Jiangsu and Shandong, Hubei, Jiangxi, Anhui, etc., also have built some pesticides industry parks to encourage pesticide companies to relocate.

With the increasing pressure from environmental protection and land cost, it is estimated that more and more pesticide companies in Zhejiang Province will relocate their pesticide production capacities to other provinces.

The relocation is expected to bring more chances to the company’s further development. Additionally, pesticide manufacturers can take this opportunity to upgrade production technology and optimize product structure during the relocation, thus strengthening competitiveness in the market.

Zhejiang has dropped to the third important pesticide production base in China at present, after Jiangsu and Shandong. There are 84 pesticide production companies (including 51 technical pesticide companies) in Zhejiang by the end of 2010, decreasing from 92 by the end of 2009.

TABLE 1: Pesticide companies in Zhejiang relocate capacity to other regions

Company Location of its subsidiary Remark on its subsidiary

Zhejiang Wynca Zhenjiang City, Jiangsu Mainly for glyphosate

Zhejiang Biok Inner Mongolia Mainly for avermectin

Zhejiang Heben Rudong City, Jiangsu With investment of USD34.74 million

Zhejiang Yongnong Laizhou City, Shandong Launched in March 2010

Zhejiang Jinfanda Hubei and Jiangxi For PMIDA and other fine chemicals

Hangzhou Qingfeng Xuancheng City, Anhui With investment of USD5.74 million

Sinochem Ningbo Ltd. Lianyungang City, Jiangsu Propiconazole, tebuconazole, etc.

Zhejiang Yifan Jiangsu Covering 15.3 ha.

Note: Zhejiang Yongnong Chem. Ind. Co., Ltd. (Zhejiang Yongnong); Zhejiang Jinfanda Bio-chemical Co., Ltd., (Zhejiang Jinfanda); Hangzhou Qingfeng Agrochemical Co., Ltd. (Hangzhou Qingfeng); Zhejiang Yifan Chemicals Co. Ltd. (Zhejiang Yifan)Source: CCM International

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Overview: main pesticides situation in China 2010

With slight recovery in domestic pesticide industry in 2010, the output of pesticide witnesses continuous

growth, predicted to exceed the output in 2009, about 2.26 million tonnes. Although the output of pesticide in China continuously enlarges in 2010, domestic demand and price, on the contrary, see slide. The domestic consumption and export of pesticide are still far less than the output in 2010 and overcapacity condition still exists.

The phenomenon in domestic pesticide market in 2010 better explains the bad performance of most pesticide players in China in the same period, such as overcapacity, production cost increased by the policy of environmental protection, RMB appreciation, abnormal weather, impacts from foreign pesticides with better quality and efficiency, etc.

The main trend is that the demand for highly effective and lowly toxic pesticides is increasing, although there are differences among insecticde, fungicide and herbicide.

Insecticide

The consumption of insecticide in 2010 witnesses decrease, in some places even seeing 30% decline according to junior crop protection officers.

With China strongly limiting highly toxic pesticides in domestic market, the output of some organophosphorus insecticides witnesses slide in 2010, such as phorate, isocarbophos, isofenphos-methyl, terbufos, etc. Along with the large promotion of pest-resistant cotton in China recently, the occurrence of cotton bollworm, cotton spider mite has been controlled, leading to slide in the usage of profenofos insecticides in 2010.

Overcapacity still baffles domestic chlorpyrifos players in 2010. China’s chlorpyrifos capacity in 2010 reaches 116,000t/a, however, domestic demand and export of chlorpyrifos are just 18,100 tonnes and 19,800 tonnes (estimated based on the data from Jan. to Oct. 2010). This condition has caused deficit of many chlorpyrifos players in China.

On the other hand, owing to the prohibition of the five kinds of highly toxic pesticides and the phase out of fipronil since 1 Oct. 2009, the demand for highly toxic pesticide alternatives, such as pymetrozine, chlorpyrifos, abamectin, emamectin, acetamiprid, has correspondingly increased.

Insecticides which are largely consumed in domestic market in 2010 include dichlorvos, phoxim, buprofezin, trichlorfon, dimethoate, isoprocarb, bisultap, chlorpyrifos, cyhalothrin, abamectin, etc.

Herbicide

Generally speaking, the demand and consumption of herbicide in 2010 witness stable growth attributed to increasing application area, change of agricultural planting structure and business model, etc. Domestic usage of

herbicides is converting to the new products with high effect, low toxicity and low dosage.

The demand for mainstream herbicides, like alachlor, butachlor, acetochlor, atrazine and trifluralin, inordinately decreases in 2010 due to the promotion of foreign herbicides and off-patent herbicides.

Nicosulfuron, an off-patent herbicide, has become one of the hot herbicides in China since 2007 when its patent expired. Nicosulfuron has been in short supply in most of the peak season in recent years. So far, there are more than 26 enterprises registered the production of nicosulfuron in China, with total capacity of more than 2,000t/a. Moreover, Hefei Fengle Seed (Group) Co., Ltd., a listed seed company in China, also announced to build a 500t/a nicosulfuron production line in 2010.

However, overcapacity and intense competition are still the dominant themes of herbicide industry in 2010. Financial crisis, abnormal weather, descending planting passion of peasants all affected the demand for glyphosate, acetochlor and atrazine.

Fungicide

The demand for fungicide witnesses growth in 2010, especially highly effecient and lowly toxic ones, ascribed to abnormal weather as well as adjustment of agricultural planting structure.

Triazole fungicides stage good sales in 2010, aided by more serious occurrence of rice diseases, such as sheath blight, false smut and rice blast on the middle and late rice in China, for about 19.2 million ha. The demand for thiophanate-methyl, carbendazim, zineb and bordeaux is also increased by the serious occurrence of vegetable and fruit diseases in 2010.

Moreover, some imported fungicides, such as Armure (Syngenta), Cuproxat (Nufarm), Horizor (Bayer) and Dithane (Dow), become the hot products in China 2010.

Outlook

Total amount of pesticide demand in China will hit 310,000 tonnes (converted into 100% purity) in 2011 according to predicted data from crop protection stations of 31 provinces (including autonomous regions and municipalities), up 2.69% compared with 2010.

Domestic demand for insecticides in 2011 will come to 124,900 tonnes, down 1.43% compared with 2010. The demand for herbicide and fungicide will reach 97,500 tonnes and 72,800 tonnes respectively in 2011, up 9.33% and 2.94% respectively over 2010.

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■ Company

Nantong Jiangshan to tide over glyphosate downturn by aid

Nantong Jiangshan Agrochemical & Chemicals Co., Ltd. (Nantong Jiangshan), a large listed pesticide enterprise in China (Code No. 600389) revealed the completion of some of its new pesticide production lines, 38,000t/a 41% AS

of glyphosate, 20,000t/a 62% AS of glyphosate and 12,000t/a technical of PMIDA, and a 30,000t/a glyphosate technical production line and some other formulation production lines to be finished. The desire for capital may be the most important thing for Nantong Jiangshan at present.

After serial hard work on negotiations, the company finally receives the help from its shareholders and local government.

On 2 Dec. 2010, Nantong Jiangshan revealed to sell 19.65% equity of Nantong Jiangtian Chemicals Co., Ltd. (Nantong Jiangtian), a chemical subsidiary of it. The total capital involved in the transaction reached USD3.22 million. After the transaction, Nantong Jiangshan’s shareholding ratio of Nantong Jiangtian dropped to 22.23% from the previous 41.88%.

Later on 7 Dec. 2010, Nantong Jiangshan received a categorical grant from local government of about USD21.15 million, aiming to compensate the loss of one year’s production suspension of some production bases in Nantong Jiangshan.

On 11 Jan. 2011, Nantong Jiangshan announces that it will receive a no more than USD45.32 million’s loan from its shareholders, SinoChem International Corporation (SinoChem International), aiming to meet its financial needs in 2011. SinoChem International will provide the loan indirectly through bank.

The company announced that the capital involved in these events will be counted in the loss and gain of 2010; thus, the net profit of 2010 is predicted to grow.

Nantong Jiangshan as one of the largest glyphosate players in China is also the most serious affected company among the listed glyphosate players in China who have suffered the downturn of glyphosate since H2 2008.

Nantong Jiangshan is mainly engaged in the production and sales of glyphosate, dichlorvos and other fine chemicals. So far, the technical capacity of glyphosate in Nantong Jiangshan reaches 70,000t/a. It is the second largest glyphosate player in China while the first one is Zhejiang Wynca Chemical Industry Group Co., Ltd. with glyphosate technical capacity of 80,000t/a in 2010.

According to H1 2010 financial report of Nantong Jiangshan, the revenue of glyphosate reaches USD81.12 million, accounting for 48.82% of its total revenue. However, profit margin of glyphosate in this period is just 1.91%, down 3.81% over H1 2009.

Dragged by glyphosate, Nantong Jiangshan firstly predicted its net profit of 2010 to be deficit after it released its Q1-Q3 financial report. However, owing to frequent moves on financial transaction recently, on 11 Jan. 2010, Nantong Jiangshan predicts net profit of 2010 to grow.

It is still hard to predict how Chinese glyphosate market will be in 2011. According to the analysis by CCM, although growth rate of glyphosate may stay at 5%-10% in the next 5-10 years due to no better substitute developed, it can’t catch up with the growth rate few years ago. More intense competition will continue to be the main theme in the global market in 2011.

Hebei Veyong to involve in DME industry

On 6 Jan. 2011, Hebei Veyong Bio-Chemical Co., Ltd. (Hebei Veyong), the biggest abamectin player in

China, announces that its transaction with ENN Energy Holding Limited (ENN Energy), a Chinese energy group listed on Hong Kong Exchanges and Clearing Limited, has been approved by China Securities Regulatory Commission (CSRC).

According to Hebei Veyong, it will acquire large equity of ENN Energy’s two wholly owned subsidiaries, namely Xinneng Energy Zhangjiagang Co., Ltd. (Xinneng Zhangjiagang) and Xinneng Energy Bengbu Co., Ltd.

(Xinneng Bengbu) to involve in the production and sales of methoxymethane (DME), a kind of raw material of pesticide.

After the transaction, 75% equity of Xinneng Zhangjiagang and 100% equity of Xinneng Bengbu will be controlled by Hebei Veyong with the total cost of about USD83.12 million.

However, the transaction will not be dealt in cash. Hebei Veyong intends to issue equivalent A shares to ENN Energy, about 75.39 million shares, accounting for 24.18% of its

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total equity. Till then the total shares of Hebei Veyong will finally come to about 311.83 million.

In recent years, DME has been publicly known in the world as one of the clean energies and high-quality chemical raw materials. In China DME is largely used to be mixed in liquefied petroleum gas (LPG) and produce chemicals. Although it is calculated that domestic capacity of DME has reached 6,500,000t/a to 8,000,000t/a in 2010, most of DME players' operating rates are less than 20% due to the impact of global financial crisis and the large-scale nationwide campaigns on regulating LPG in June 2010.

Actually, eyeing the great prospects of DME in the future, Hebei Veyong started negotiating the acquisition proposal with ENN Energy early on 26 Aug. 2008. Later on 15 Oct. 2008, after about two months' negotiation, both sides finally reached an agreement. For the past two years, the transaction plan is under evaluation and government’s investigation.

Owing to the net assets involved in this transaction exceeding USD7.54 million and surpassing 50% of Hebei Veyong's net assets in 2009, the transaction has to be

reported to CSRC to get approval according to Measures for Administration of Material Assets Reorganization of Listed Companies, which came into force on 18 May 2008.

Hebei Veyong believes it is the right choice to purchase DME capacity from ENN Energy since the rising prices of raw materials and energy have been one of the main reasons to drag down its net profit growth in 2007 and 2008, down 46.24% and 49.31% respectively year on year. With the large capacity Hebei Veyong involved, it will bring down its total cost of raw materials.

Moreover, as more and more strict policies on cleaner production have been continuously carried out by Chinese government, DME will see great opportunity in China and the sales of DME will finally bring profit to Hebei Veyong.

Hebei Veyong, founded in 1992, is the first Hebei-based enterprise to get listed. Hebei Veyong is a comprehensive company that applies itself to R&D, production and sales of pesticide formulations. Currently, the company’s main products include abamectin, paraquat, emamectin benzoate, imidacloprid, etc.

FIGURE 1: Hebei Veyong’s sales and net profit, 2006~Q1-Q3 2010

Source: Hebei Veyong’s financial reports from 2006 to Q1-Q3 2010

M&A: Lier Chemical and Jiangsu Kuaida

On 30 Dec. 2010, Lier Chemical Co., Ltd. (Lier Chemical), the largest chloropyridine herbicide player in China, releases that its reorganization with Jiangsu Kuaida Agrochemical Co., Ltd. (Jiangsu Kuaida), a high-tech pesticide

company in Jiangsu Province, has been approved by China Securities Regulatory Commission (CSRC).

According to Lier Chemical, Lier Chemical will pay approximately USD25.64 million to obtain 64,384,898 stakes of Jiangsu Kuaida, accounting for 51% equity of Jiangsu Kuaida.

Different from normal acquisitions among listed companies, the M&A between Lier Chemical and Jiangsu Kuaida is considered as a major assets reorganization of Lier Chemical due to the high purchasing price.

Lier Chemical is very exited about the M&A with Jiangsu Kuaida and is also confident of its business performance after the transaction. Lier Chemical predicts that its revenue is to witness 100% growth in 2011 and net profit to achieve 30% to 50% growth in H1 2011.

Actually, aiming to reduce the risk of single production structure and seize the opportunity to merge advantage enterprises with complementary businesses, Lier Chemical launched the proposal of M&A with Jiangsu Kuaida on 28 April 2010 and it is considered to be the first reorganization announcement in pesticide industry in 2010. After serial months' audit and investigation, CSRC finally approves the transaction.

So far, Lier Chemical is mainly engaged in the technical production and export of chloropyridine herbicides. Although it struggles to enlarge the formulation sales in domestic market, the terminal market sales of formulations still witness

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undergrowth. The global market revenue of Lier Chemical in H1 2010 reaches USD33.96 million, about 5.5 times more than the revenue in domestic market.

Jiangsu Kuaida obtains diversified pesticide production capacities, with over seventy pesticide products including herbicides, fungicides and insecticides. According to Lier Chemical, the largest attraction of Jiangsu Kuaida is its excellent performance in domestic market.

With serial decades' development in domestic pesticide market, Jiangsu Kuaida owns rich domestic market resources and its sales network covers large areas of China. Over 800 agents are distributed in many large agricultural provinces, such as Heilongjiang Province, Shandong Province, Jiangsu Province, Hunan Province, Hubei Province, Anhui Province, etc. With the continued recovery of domestic pesticide market in 2011 and the cooperation with Jiangsu Kuaida, Lier Chemical’s performance in domestic market is believed to witness huge growth in 2011.

Moreover, Lier Chemical’s herbicide business will be largely strengthened after the M&A, as the two companies are both strong in herbicide industry. Among Jiangsu Kuaida’s pesticide business, sales of herbicide is the largest, accounting for over 80% of the total revenue. Although it has suspended glyphosate’s production due to the continuously depressed price of glyphosate in the world. The equipment for glyphosate production is still under normal maintenance and will resume production as soon as the price of glyphosate recovers.

Lier Chemical, founded in 1993 by China Academy of Engineering Physics, is a Sino-foreign joint venture mainly engaged in research and development, production, application and sales of agrochemicals. It is famous for chloropyridine herbicide production in China. It's revenue in Q1-Q3 of 2010 hits USD54.68 million, up 10.18% year on year and net profit in this period reaches USD10.42 million, down 25.02% year on year.

Jiangsu Kuaida, entirely reformed from Rudong Pesticide Factory, is a comprehensive pesticide and chemical enterprise. It is the largest substituted urea herbicide production base (diuron, isoproturon, chlortoluron, linuron, fluometuron, etc.) in China, with I/E license. At present, it mainly produces fifty kinds of products, including three series of pesticides (herbicides, insecticides and bactericides), acyl chloride series of intermediates (for pesticide, medicine and dye) and a series of phosgenation intermediates (for pesticide, medicine and dye), etc.

TABLE 2: Pesticide performance of Jiangsu Kuaida, H1 2010

Product Type Capacity, t/a Output, tonnes Sales, million USD

Herbicidetechnical 9,600.00 3,011.73 168.81

formulation 12,900.00 3,324.09 6.37

Fungicidetechnical 400.00 170.87 1.93

formulation 500.00 135.56 1.10

Insecticidetechnical 3,100.00 465.00 1.86

formulation 5,000.00 687.52 0.74

Source: Major assets acquisition report of Lier Chemical

Jiangsu Tianrong to relocate

Jiangsu Tianrong Group Co., Ltd. (Jiangsu Tianrong), an outstanding pesticide player in China, launches its

relocation plan recently.

According to an insider from Jiangsu Tianrong, the relocation will last until Nov. 2011 due to its large-scale construction of the new factory. Under the great pressure from Pesticide Industry Policy which carried out last year aiming to crack down on domestic chaotic pesticide industry, the company decides to wholly relocate into Xiangshui Chemical Industrial Park (Yancheng City, Jiangsu Province).

The total investment in this relocation will reach USD123.10 million and some of the new production lines are now under construction. The old factories are still under production until the new production lines are to be completed at the end of 2011. The total capacity of

Jiangsu Tianrong is temporarily predicted to reach about 100,000t/a till then.

“The capacity will be definitely expanded, but accurate data of how much it will be after the construction is still not clear. We shall decide according to the 12th Five-Year Plan (2011-2015). And we will also add some new products; they are also not decided yet.” says the insider.

Actually, a subsidiary of Jiangsu Tianrong, namely Jiangsu Lulilai Co., Ltd. (Jiangsu Lulilai), a large herbicide player with total capacity of 20,000t/a, has already started to relocate into the industrial park since 2010.

Jiangsu Tianrong has planned to wholly relocate in 2010, but it decided to relocate separately by different subsidiaries due to the large projects and capital investment involved. This year, another subsidiary of Jiangsu

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■ Financing

Anhui Huilong to launch IPO

Recently, Anhui Huilong Agricultural Means of Production Co., Ltd. (Anhui Huilong), a large chain store company of agricultural materials in Anhui Province, releases prospectus aiming to launch IPO in the near future.

Anhui Huilong intends to get listed on Shenzhen Stock Exchange A share market and offer 37.5 million shares to public. After the offering, Anhui Huilong’s total shares will reach 149.5 million. However, the price of each share and the accurate IPO date are still under discussion.

According to Anhui Huilong, the raised funds in the IPO will be invested in the building of new distribution centers and information system, aiming to build up 20 standardized distribution centers in China. Ten of these 20 standardized distribution centers will be built inside Anhui Province and others will be built elsewhere. Total investment of the two projects is estimated to be USD61.06 million, including USD56.17 million invested in the construction of new distribution centers and USD4.89 million invested in the building of information system.

Anhui Huilong is mainly engaged in chain operation of major agricultural materials, such as fertilizer, pesticide, seed, etc., especially fertilizer (annual sales volume of over 1.8 billion tonnes in recent years). With years’ development, Anhui Huilong has built up 56 standardized distribution centers and over 2,300 chain stores in nine main agricultural material consumption provinces, such as Heilongjiang Province, Jilin Province, Henan Province, Jiangsu Province, etc. The revenue and net profit of Anhui Huilong in Q1-Q3 2010 mounts to USD635.39 million and USD14.24 million respectively.

If the IPO of Anhui Huilong is successfully launched, it will become the first chain store company of agricultural materials to get listed since 2010. With the exemplary role Anhui Huilong takes, more and more chain store companies may resort to getting listed in the near future. Some domestic influential chain store companies obtain the capability to get listed,

TABLE 3: Capacity of main pesticides of Jiangsu Tianrong after relocation

Product Capacity, t/a Product Capacity, t/a

Monosultap 11,000 Metsulfuron 200

Bisultap 12,450 Chlorsulfuron 100

Cartap 6,000 Chlorimuron-ethyl 100

Thiocyclam-hydrogenoxalate 200 Tribenuron 200

Beta-cypermethrin 100 Ethametsulfuron 100

Bifenthrin 100 Pyridine-ethyl 200

Quizalofop-P-ethyl 300 Bensulfuron 300

Fenoxaprop-P-ethyl 1,000 Nicosulfuron 300

Other formulations and by-products 67,350 - -

Total 100,000 - -

Source: Jiangsu Tianrong

Tianrong will also launch relocation, namely Jiangsu Ruihe Chemical Co., Ltd., which is mainly engaged in herbicide production. The relocation of the rest subsidiaries will be conducted in the following years.

According to the insider, aiming to raise funds to increase the competition strength and further expand the business range, Jiangsu Tianrong intends to get listed in 2011. It has submitted application to China Securities Regulatory Commission (CSRC) in 2010. CCM will pay close attention to the IPO process in the future.

Jiangsu Tianrong Group, locates in Nanjing City of Jiangsu Province, is a large high-tech group composed of pesticide production (main business), international trade and package printing, etc. It now owns five large subsidiaries,

including three production companies, one trade company and one research company, namely Jiangsu Tianrong, Jiangsu Ruihe Chemistry Co., Ltd., Jiangsu Zhongyi Co., Ltd., Jiangsu Tianrong International Trade Co., Ltd. and Liyang Tianrong Research Institute Co., Ltd. Jiangsu Tianrong is the mother company of the rest subsidiaries.

Jiangsu Tianrong, with total assets of USD22.66 million, is reorganized from Jiangsu Liyang Chemical Factory. Its average annual revenue in recent years reaches USD75.53 million. It is famous for the production and research on nereis toxins insecticides and sulfonylurea herbicides in China and is estimated to be the largest player of these pesticides in domestic pesticide industry.

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especially for Huiwanjia Agriculture Capital Chain Co., Ltd. and Guangdong Tianhe Agricultural Means of Production Co., Ltd., which have announced to get listed in 2011 or 2012.

It is incompletely estimated that at present there are more than 4,000 chain store companies of agricultural materials in China, largely increased since the first one appeared in 2000. Chinese government has given large support to this kind of operation modes and continuously issued related supportive policies, such as the “China's No.1 Document” in early 2010. However, the current chain store mode accounts for merely 20% market share in China, much lower than the mainstream ways that agricultural materials being distributed by dealers.

As the complex circulation of the traditional sales mode pushing up the cost of circulation, especially the rail transport cost raised in 2009, more and more agricultural material companies start to do everything possible to cut down the cost in circulation. With advantage in cutting processing links of circulation, agricultural materials’ price can be reduced, which shows great competitiveness in domestic market, bringing great opportunities to chain store mode. It is foreseeable that under the support of government and led by leading enterprises, chain store mode will gradually become the mainstream in current industry of agricultural materials.

Jiangsu Limin won't get listed before Chinese Spring Festival of 2011.

TABLE 4: Large chain store companies in China

Company

Jinxiu Qiancun Agricultural Materials Sales (Chains) Co., Ltd.

Xiyangyang Agricultural Materials Sales (Chains) Co., Ltd.

Huiwanjia Agriculture Capital Chain Co., Ltd.

Shandong A&fine Agricultural Materials Co., Ltd.

Zhejiang Taizhou Nongzi Co., Ltd.

Shaanxi Limin Agricultural Materials Sales (Chains) Co., Ltd.

Guangdong Tianhe Agricultural Means of Production Co., Ltd.

Source: CCM International

Jiangsu Tianrong Group Co., Ltd. (Jiangsu Tianrong), an outstanding pesticide player in China, launches its

relocation plan recently.

According to an insider from Jiangsu Tianrong, the relocation will last until Nov. 2011 due to its large-scale construction of the new factory. Under the great pressure from Pesticide Industry Policy which carried out last year aiming to crack down on domestic chaotic pesticide industry, the company decides to wholly relocate into Xiangshui Chemical Industrial Park (Yancheng City, Jiangsu Province).

The total investment in this relocation will reach USD123.10 million and some of the new production lines are now under construction. The old factories are still under production until the new production lines are to be completed at the end of 2011. The total capacity of Jiangsu Tianrong is temporarily predicted to reach about 100,000t/a till then.

“The capacity will be definitely expanded, but accurate data of how much it will be after the construction is still not clear. We shall decide according to the 12th Five-Year Plan (2011-2015). And we will also add some new products; they are also not decided yet.” says the insider.

Actually, a subsidiary of Jiangsu Tianrong, namely Jiangsu Lulilai Co., Ltd. (Jiangsu Lulilai), a large herbicide player

with total capacity of 20,000t/a, has already started to relocate into the industrial park since 2010.

Jiangsu Tianrong has planned to wholly relocate in 2010, but it decided to relocate separately by different subsidiaries due to the large projects and capital investment involved. This year, another subsidiary of Jiangsu Tianrong will also launch relocation, namely Jiangsu Ruihe Chemical Co., Ltd., which is mainly engaged in herbicide production. The relocation of the rest subsidiaries will be conducted in the following years.

According to the insider, aiming to raise funds to increase the competition strength and further expand the business range, Jiangsu Tianrong intends to get listed in 2011. It has submitted application to China Securities Regulatory Commission (CSRC) in 2010. CCM will pay close attention to the IPO process in the future. Jiangsu Tianrong Group, locates in Nanjing City of Jiangsu Province, is a large high-tech group composed of pesticide production (main business), international trade and package printing, etc. It now owns five large subsidiaries, including three production companies, one trade company and one research company, namely Jiangsu Tianrong, Jiangsu Ruihe Chemistry Co., Ltd., Jiangsu Zhongyi Co., Ltd., Jiangsu Tianrong International Trade Co., Ltd. and Liyang Tianrong Research Institute Co., Ltd. Jiangsu Tianrong is the mother company of the rest subsidiaries.

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Jiangsu Tianrong, with total assets of USD22.66 million, is reorganized from Jiangsu Liyang Chemical Factory. Its average annual revenue in recent years reaches USD75.53 million. It is famous for the production and research on nereis toxins insecticides and sulfonylurea herbicides in China and is estimated to be the largest player of these pesticides in domestic pesticide industry.

TABLE 5: Capacities of key pesticide technicals of Jiangsu Limin in 2010

No. Fungicide Capacity, t/a

1 Mancozeb 20,000

2 Chlorothalonil 7,000

3 Cymoxanil 1,000

4 Metam-sodium 5,000

5 Propineb 5,000

6 Fosetyl-Al 2,000

7 Difenconazole 100

8 Azoxystrobin 100

9 Thiacloprid 500

Source: Jiangsu Limin

TABLE 6: New production lines of Jiangsu Limin to be constructed after IPO

No. Fungicide Capacity

1 Pyrimethanil 500t/a technical and SC formulation

2 Cymoxanil 2,000t/a technical and WDG formulation

3 Azoxystrobin 100t/a technical and WDG formulation

4 Folpet 2,000t/a technical and WDG formulation

Source: Jiangsu Limin

■ Crops

China’s soybean import hits record high 2010

According to statistics that China Customs released on 10 Jan. 2011, China imports 54.80 million tonnes of soybean in 2010, up 12.25 million tonnes over 2009 which was 42.55 million tonnes. The soybean import volume in 2010 is

the highest in history. Insiders from domestic soybean industry expect that the soybean import volume will continue to increase in 2011, but the growth rate will see decline.

China’s soybean import volume has witnessed continuous increase since 2005, but the increase volume in 2010 is the biggest, with the grow rate of 28.78%. The increase volume first exceeds 10 million tonnes.

The huge increase in the soybean import is first attributed to China’s restriction on soybean oil from Argentina in 2010. Before 2010, China usually imports about 1 million tonnes to 2 million tonnes of soybean oil from Argentina every year.

Since China restricted the import of soybean oil from Argentina in 2010, it had to import more soybeans to meet the oil demand in domestic market. China imports 6.87 million tonnes of plant oil in 2010, 1.29 million tonnes less than that in 2009. If China uses soybean to fill gap, it has to import about 7 million tonnes more of soybean, as the oil content of the soybean is about 19%.

Besides, oil demand is very strong in China and soybean oil has become the most important edible oil in domestic market. It is estimated that domestic’s soybean crush capacity will exceed 100 million tonnes annually by the end of 2011.

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It is expected that the soybean import volume will keep an uptrend in 2011, but the growth rate will witness some decrease. First, China has stopped the restriction on import of soybean oil from South America, so the import of soybean oil may witness some increase in 2011, which would reduce the dependence on the import of soybean. Besides, Chinese government reserved a batch of soybean in 2008. The government may sell this batch of soybean in 2011.

However, China will become more and more dependent on imported agricultural commodities. The planting area in China is limited, but the demand for agricultural commodities has witnessed huge increase in recent years.

What makes things worse is that the planting enthusiasm in China is low at present although China has implemented some subsidies for agricultural production and the prices of agricultural commodities are increasing. Most peasants think that they can earn more by working in cities than planting crops. Besides, the prices of agricultural production means such as seeds, pesticides, fertilizers, etc., increase faster than that of crops, which reduces a big part of the profit.

As for the domestic soybean industry, things are even worse. Domestic peasants are more like to plant corn and wheat because soybean is a less profitable crop than wheat or corn in China.

FIGURE 2: China’s soybean import volume, 2005 to 2010

China Customs

Average market price of main crops in China (14 Jan. 2010)

Crops14-Jan-11 31-Dec-10 Jan-10

USD/t RMB/t USD/t RMB/t USD/t RMB/t

Wheat 321 2,118 323 2,128 292 1,997

Corn 297 1,958 295 1,947 255 1,744

Soybean(oil) 641 4,233 660 4,350 580 3,962

Soybean(food) 750 4,950 766 5,050 659 4,500

Peanut 1,394 9,200 1,381 9,100 1,171 8,000

Indica rice 505 3,330 501 3,300 442 3,020

Japonica Rice 595 3,926 586 3,860 470 3,210

Rapeseed 591 3,900 645 4,250 578 3,950

Broomcorn 305 2,010 316 2,080 307 2,100

Source: CCM International

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Pest/disease forecast on rice in Jiangsu, 2011

Crop Main pests/diseases Occurrence area, ‘000 ha. Occurrence time

Rice

Rice leaf roller 4,066 2011

Rice plant hopper 5,000 2011

Rice stem borer 866 2011

Rice walker 666 2011

Rice blast 533 2011

Rice sheath blight 2,133 2011

Rice black-streaked dwarf 333 2011

Rice false smut 1,000 2011

Source: CCM International

■ News in Brief

Jiangsu Anpon initiates ionic membrane caustic soda production

Jiangsu Anpon Electrochemical Co., Ltd. (Jiangsu Anpon), one of the leading pymetrozine producers in China, has launched its 200,000t/a ionic membrane caustic soda project in 25 Dec. 2010. The project was started in 2007, but it was delayed by the global financial crisis in 2008. Jiangsu Anpon restarted the project in 2009 and the project was finally completed in 2010.

Freezing rain and snow impacts greenhouse vegetable production

Freezing rain and snow has hit Hunan, Chongqing and Guizhou, etc. since 1 Jan. this year. The low temperature caused by the freezing rain and snow has impacted the agricultural production in these regions, especially the greenhouse vegetable production.

A batch of illegal isocarbophos found in Hainan

Hainan Industrial and Commercial Bureau recently found 600 bottles of isocarbophos in Haikou City, Hainan Province. "Isocarbophos was banned for use in Hainan Province. The offender will be punished according to law. The maximum penalty for the logistics company is USD7,550 and the maximum penalty for the owner of the pesticide is USD4,530." Hainan Industrial and Commercial Bureau reveals.

Chemical pesticide output achieves new peak

According to statistics from National Bureau of Statistics of China, the output of chemical pesticides hits record high of 2.49 million tonnes in the first 11 months of 2010, up 20.6% year on year. Among the total, the output in Oct. 2010 is 0.25 million tonnes, up 22.2% year on year.

Output of chemical fertilizers sees increase

According to statistics from National Bureau of Statistics of China, the output of chemical fertilizers in the first 11 months of 2010 is 61.54 million tonnes, up 4.7% year on year. Among the total, the output in Oct. 2010 is 5.66 million tonnes, up 4.3% year on year.

Lier Chemicals 2010 net profit down 23.20%cLier Chemical Co., Ltd. releases its 2010 financial report on 13 Jan. 2011. The company’s sales revenue is USD69.09 million in 2010, up 15.74% year on year, but its net profit decreases by 23.20% year on year to USD11.77 million. The company revealed that net profit in 2010 is low because it reduced the price of part of its products to enhance sales in the market. Besides, marketing cost of the company witnesses some increase in 2010.

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Jiangsu Yunfan to build new production lines

Jiangsu Yunfan Chemical Co., Ltd. plans to build some pesticide production lines in the near future, including 200t/a fipronil technical, 200t/a glufosinate technical, 200t/a fenamiphos technical, 200t/a bromacil technical, etc. These projects are under Environment Impact Assessment at present.

Global market value of biological pesticides to largely increase

It is predicted that global market value of biological pesticides will reach about USD2.8 billion around 2015 driven by the large usage growth of biological pesticides in the world, especially in Europe and America.

Serious drought attacks North China

Serious drought attacks North China on 12 Jan., including nine provinces/regions in this area such as Shandong, Henan, Hebei, etc. There is no rain in Beijing for at least four months and the winter wheat and animals in Beijing have suffered greatly.

It is predicted that the drought will carry on in the next ten days.

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