S&P Global Ratings expects moderate growth in agrochemicals this year as demand for fertilizers and pesticides remains soft and supply still excessive.

“This is because some major challenges remain. These include significant supply surplus, primarily from China, and an uncertain pace of restocking in a volatile market environment,” a report from S&P said.

The global credit analyst believes China, the world’s top agrochemicals exporter, might slow production after company earnings and prices of major products hit record-lows last year.

Oversupplied situation

“The country’s agrochemical industry has been in an over-supplied situation over the years. Chinese producers will, in our view, lower production utilization rates as needed,” S&P says.

“This was seen last year with utilization rates falling to 65 percent for major crop-protection products, comparable to the last downturn over 2014 to 2016,” it adds.

S&P projects Chinese investment for these products to drop from 32 billion Chinese renminbi to 12 billion this year, before slightly rising to 13 billion in 2025.

Meanwhile, Chinese exports fell from nearly 3 million tons last year to 2 million tons, similar to the 2021 level.

Apart from weak demand and oversupply, S&P says China is grappling with global trade conflicts, and environmental and safety regulations.