Yellow Phosphorus Exposed on CCTV; Organophosphate Prices to Rise

These past few days the chemicals industry has been discussing one big event: pollution in the yellow phosphorus industry has made it onto CCTV's Focus Report (Jiaodian Fangtan)!

At this critical juncture for environmental protection, the yellow phosphorus industry has walked right into the line of fire!

And yellow phosphorus is an important raw material for our pesticide products, especially for organophosphate pesticides such as trichlorfon, chlorpyrifos, dichlorvos, triazophos, monocrotophos and methyl parathion. Although most of these have been banned, some conventional organophosphate pesticides are still sold on the market — for example the big single product chlorpyrifos.

It must be said that yellow phosphorus has a big impact on insecticides, but nowhere near its impact on herbicides! Yellow phosphorus is one of the most important raw materials for the two brothers, glyphosate and glufosinate.

At present there are two routes for producing glyphosate technical: one is the glycine route, the other the IDA route. Both routes use yellow phosphorus. As for domestic glyphosate technical producers, roughly 70% use the glycine process and 30% the IDA route; the representative company for the glycine process is Xinanjiang, and for the IDA route Huaxing Chemical. Let us look at the raw-material table for making glyphosate by the glycine route:

The table shows that making one tonne of glyphosate technical requires 0.37 tonnes of yellow phosphorus, and yellow phosphorus accounts for more than 25% of the production cost of glyphosate technical! A while ago yellow phosphorus rose from 11,000 yuan per tonne to 16,000 yuan per tonne, and glycine also rose in price at that time because of environmental protection, causing glyphosate prices to soar once. Now that the yellow phosphorus industry has had this incident, the cost of glyphosate technical is bound to rise.

Because this article needed the data, I searched online for the price of yellow phosphorus: many websites and companies have stopped quoting yellow phosphorus:

And these companies, were quoting normally on 2 July, but stopped quoting after Focus Report aired on 3 July — a development that warrants vigilance!

As everyone knows, once something appears on Focus Report there is bound to be a fierce rectification campaign — that is the experience, and everyone understands it better than I do. Most importantly, this yellow phosphorus matter has come up at the very time when environmental enforcement is strictest, so the rectification will inevitably be unprecedented. And rectification means first shutting down production across the board, after which only enterprises that meet environmental standards may produce. The yellow phosphorus industry is very large and involves many localities, and coordinated rectification takes time. In other words, restarting production in the yellow phosphorus industry will be rather difficult in the short term.

A quick search online shows that some places have begun rectifying yellow phosphorus producers:  

When upstream shuts down, downstream raw-material prices rise — that is the lesson environmental and safety inspections have taught us. And this time it is not one company that has had the incident but the whole yellow phosphorus industry, so the impact on yellow phosphorus prices will not be small. That means organophosphate pesticides, and glyphosate and glufosinate, are bound to rise within the coming cycle!

To verify this view, I made a point of consulting people in the industry who understand the market:

Sichuan Chuandong and Sichuan Xianyida Chemical (mainly producing glyphosate technical and formulations), Mr Ye Jian:

Guangxi Jinhongda (mainly producing glufosinate formulations), Mr He Shengrong:

Industry expert and technical specialist Mr Yi Hailiang:

In a word, yellow phosphorus is elemental phosphorus, and pesticides linked to phosphorus are likely to rise in price soon, because the phosphorus in pesticides basically comes from yellow phosphorus!

How should distributors respond?

At present most formulation companies hold some stock, especially of the high-volume products chlorpyrifos, glyphosate and glufosinate; companies will hold technical material in stock. If you need to sell in the near term, it is worth considering stocking up a little. From the rectification of the yellow phosphorus industry to an actual shortage and price rise there is roughly one cycle, but one cannot rule out that, because of the rectification, upstream companies will hold back from selling, driving raw-material prices up. Abamectin technical paste is a good example: within about 20 days the technical material rose from 450,000 to 650,000 yuan per tonne, and the real reason was not that supply was short but that companies were reluctant to sell.

To sum it up in one sentence:

Organophosphate pesticides are going to rise in price; glyphosate and glufosinate will rise even more sharply. If you need it, stock up; if not, wait and see.

Nongzi Lianmeng (Agri-inputs Alliance Network)