According to the Zhitong Finance APP, Debang Securities released a research report stating that after the overseas inventory destocking in the pesticide industry, prices are currently showing a bottom rebound. As of July 27, the price index of raw pesticides in China was 75.35, an increase of 4.3% from the 25-year low, indicating a gradual recovery in the pesticide industry's prosperity. Overseas export demand continues to improve, with the peak season for domestic pesticide exports to the United States from the end of the year to April of the following year, and June to August being the peak season for exports to South America. According to Wind, in the first half of 25, the export volumes of herbicides, insecticides, and fungicides were 1.229 million tons, 2.609 million tons, and 1.325 million tons, respectively, with year-on-year increases of 13.6%, 31.9%, and 24.4%. It is expected that with the continuous promotion of the &#34;anti-involution&#34; and &#34;one product, one certificate&#34; policies, the pesticide industry is likely to welcome a prosperous cycle, with optimism for certain pesticide products that have already optimized their patterns.
<h2>Debang Securities' main viewpoints are as follows:</h2>
Event: ① According to the official account of the China Pesticide Industry Association, on July 24, the association officially launched a three-year action plan for the entire industry called &#34;anti-involution,&#34; expecting that by the end of 2027: market order will be significantly improved, involution-style competition within the industry will be effectively curbed, product quality will be significantly enhanced, illegal production activities will be fundamentally restrained, and enterprises' compliance awareness will be significantly strengthened. ② According to the Pesticide Market Information official account, on June 29, the Ministry of Agriculture and Rural Affairs released amendments to four regulations supporting the pesticide management regulations and revised the management measures for pesticide labels and instructions, with the &#34;one product, one certificate&#34; policy set to be implemented on January 1, 2026.
Severe Involution in the Pesticide Industry, Continuous Malicious Price Competition
According to the Pesticide Market Information, in 2024, the number of large-scale enterprises in China's pesticide industry is expected to grow by 3.2% year-on-year, while total profits are expected to decline by 3.4%; export volume is expected to grow by 28.8%, but export value will only increase by 11.3%.
The involution-style competition in the pesticide industry is becoming increasingly severe: 1) There is a serious overcapacity on the production side. For example, the global demand for chlorantraniliprole is 10,000 to 15,000 tons, while the domestic environmental assessment declared capacity exceeds 250,000 tons, with actual built capacity around 200,000 tons, which is more than ten times the global demand; the global demand for prothioconazole is 15,000 tons, and as of 2024, China has built, under construction, and planned capacities exceeding 78,900 tons; many generic pesticides in China that have just passed the patent period have annual production capacities sufficient to meet global demand for over three years.
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Malicious competition. Price wars among distributors and retailers are fierce, characterized by severe homogenization, low levels, and low efficiency, leading to vicious price-cutting competition; there are issues of &#34;counterfeiting and selling fake products&#34; online, such as the presence of low-concentration glyphosate raw liquid products with high chloride ion concentrations in the market, severely disrupting the market order of glyphosate soluble agents.
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Low registration costs. The registration costs for the same formulation are low, registration times are quick, and there are fewer approval steps, allowing for rapid market entry. The number of registrations for the same formulation can reach about 1/4 each period, and with the increase in similar certificates, price wars in the market become increasingly intense.
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Active Promotion of &#34;Anti-Involution&#34; and &#34;One Product, One Certificate&#34; to Regulate the Market
In the context of such severe involution in the pesticide industry, the industry is actively responding to the national &#34;anti-involution&#34; policy call. On July 24, the China Pesticide Industry Association officially launched a three-year action plan for the entire industry called &#34;anti-involution,&#34; with key tasks including:
It is strictly prohibited to add hidden ingredients or sell unregistered active ingredients under the guise of additives in products. Hidden additions can increase safety risks during application, which has been a long-standing issue in the industry. According to Agricultural Materials News, the 2024 sampling results show that the qualification rate of insecticides is lower than that of herbicides and fungicides, with hidden additions found in substances such as Methomyl, Abamectin, Imidacloprid, and Fly Bait. Future regulations are expected to become stricter.
Severe crackdowns on illegal production activities. Establish a digital closed-loop management service platform for the pesticide industry. Utilize advanced technologies such as big data analysis, the Internet of Things, and blockchain to implement closed-loop management throughout the process for strictly regulated pesticides like Paraquat and Chlorpyrifos, and implement traceability management for intermediates and supply chains of key products such as Chlorantraniliprole, Thiamethoxam, and Thiacloprid.
It is strictly prohibited to sell or purchase illegal active ingredient processing formulations. Promote the improvement of quality standards for certain raw (active) ingredient products. The focus is on revising and formulating standards for bulk pesticide-related products such as Amino-Avamectin Benzoate, Imidacloprid, and Glyphosate, and researching to enhance impurity limits and other indicator requirements to provide technical support for market regulation.
Resist low-price disorderly competition behaviors among enterprises. At the same time, the Ministry of Agriculture and Rural Affairs has issued the &#34;One Product, One Certificate&#34; policy. According to the pesticide market information public account, the number of pesticide product registrations in China is approximately 48,000. Due to the multiple uses of one certificate, over 200,000 products have derived from it, and products that borrow certificates or are processed by commission usually account for 80% to 90% of total products. With the advancement of the &#34;One Product, One Certificate&#34; policy, the supply in the pesticide industry is expected to be reshaped.
The industry may be on the rise, and &#34;anti-involution&#34; may catalyze this
After the overseas inventory destocking, the pesticide industry is currently experiencing a bottom rebound in prices. As of July 27, the raw material price index in China is 75.35, an increase of 4.3% from the 25-year low, indicating a gradual recovery in the pesticide industry. Overseas export demand continues to improve, with the peak season for domestic pesticide exports to the United States from the end of the year to April of the following year, and June to August being the peak season for exports to South America.
According to Wind, in the first half of 25, the export volumes of herbicides, insecticides, and fungicides were 1.229 million tons, 2.609 million tons, and 1.325 million tons, respectively, with year-on-year increases of 13.6%, 31.9%, and 24.4%. It is expected that with the continuous advancement of the &#34;correcting wind and treating involution&#34; and &#34;One Product, One Certificate&#34; policies, the pesticide industry is likely to enter a prosperous cycle. Optimistic about certain pesticide products that have already optimized their patterns, such as Glyphosate (Brazil's export demand boost, anti-involution + Monsanto litigation risks may constrain supply), Glufosinate (new regulations limiting product chloride ions to promote supply reduction), Chlorantraniliprole and K-Amine (capacity reduction due to force majeure), Acetochlor (capacity reduction due to force majeure), Bacillus subtilis (high industry concentration, South American market boosting exports), Abamectin and Methomyl (South American market boosting exports, previous supply constraints due to insufficient operations), and Mesotrione (the U.S. market is expected to open).
Regarding the targets
Recommended to pay attention to: Yangnong Chemical (600486.SH), RAINBOW CHEMICAL (301035.SZ), Xinnong Chemical (600596.SH), Jiangshan Co., Ltd. (600389.SH), Hunan Hailir (600731.SH), ABACHEM (300261.SZ), Yingtai Biological (833819.BJ), hailir (603639.SH), Cynda (603086.SH), Zhongnong Lihua (603970.SH), Changqing Co., Ltd. (002391.SZ), and Zhongqi Co., Ltd. (300575.SZ)
Xinnong Chemical (002942.SZ), Fengshan Group (603810.SH), Lvheng Technology (870866.BJ), Lanfeng Biochemical (002513.SZ).
Risk Warning
Risks of macroeconomic downturn, significant fluctuations in raw material prices, downstream demand not meeting expectations, risks of substantial capacity expansion, safety production and environmental protection risks, operational risks of enterprises, etc

600486

300261

603639

301035

002942

603086

Debon Securities released a research report indicating that after the destocking of overseas inventories, the pesticide industry has seen a bottom rebound in prices, and the industry's prosperity is gradually recovering. It is expected that with the advancement of the "Rectifying Wind and Managing Volume" and "One Certificate, One Product" policies, the pesticide industry will enter a prosperous cycle. The report mentioned that the export demand for pesticides continues to improve, especially for exports to the United States and South America. Despite severe competition within the industry, it is expected that by the end of 2027, the market order will significantly improve, and product quality will enhance

Zhitong

Yangnong Chemical

ABACHEM

hailir

RAINBOW CHEMICAL

Xinnong Chemical

Cynda

Debon Securities: The industry "anti-involution" has begun, optimistic about certain pesticide products with optimized patterns