The Dilemma of the Global Pesticide Market and New Directions for Chinese Enterprises​

Currently, the global pesticide market has entered a challenging new phase, characterized by a growing trend of slowing growth and oversupply, which continues to squeeze corporate profit margins. Against this backdrop, Chinese pesticide enterprises are in urgent need of finding new development paths. The traditional model relying on bulk technical materials is no longer viable, and a growing number of enterprises are turning their attention to new molecules and compounds with expiring patents, hoping to gain a competitive edge in the saturated global market.​

David Li, Marketing Director of SPM Biotechnology and contributor to China Price Index, stated bluntly: "Relying solely on B2B sales to multinational corporations is no longer a sustainable growth strategy. Chinese suppliers must rethink their market role and make more strategic investments in product assets." This viewpoint underscores the urgency of transformation for Chinese pesticide enterprises.​

Rethinking the Cooperative Relationship with Multinational Corporations​

Once Highly Dependent Partnerships​

For a long time, China's pesticide industry, leveraging its advantages in cost and production capacity, has served as a crucial manufacturing engine for multinational corporations (MNCs), producing active ingredients and intermediates required for their branded products sold globally. Under this cooperative model, Chinese pesticide enterprises achieved a certain scale of development and quickly integrated into the global pesticide industrial chain.​

Reasons for the Shifting Relationship​

However, this close cooperative relationship is now under significant strain. "Chinese enterprises that still rely on the demand of multinational corporations are facing the dilemma of diminishing returns," Li pointed out. Even well-managed B2B enterprises struggle to achieve satisfactory return on assets amid the current industry downturn.​

The root cause lies in structural changes in the industry. To cope with market pressures, multinational corporations are drastically cutting procurement costs, forcing Chinese suppliers to reduce profit margins without receiving commitments on long-term procurement volumes. This unequal exchange is unsustainable. Li explained: "Unless multinational corporations agree to provide long-term procurement guarantees, Chinese suppliers will increasingly tend to adopt a diversification strategy to pursue other high-margin growth opportunities."​

Compounds with Expiring Patents: Opportunities and Risks Coexist​

Potential Market Opportunities​

In the search for new growth opportunities, investing in new molecules or compounds with expiring patents has become a key direction. As patents for best-selling technical materials expire, Chinese manufacturers, if able to rapidly expand production capacity, are expected to capture global market share, presenting potential development opportunities for enterprises.​

Risks of Overcapacity​

Nevertheless, risks cannot be ignored alongside opportunities. Take SDHI fungicides as an example: two active ingredients, saflufenacil and pyroxasulfone, which are about to have their patents expire, have attracted close attention from the industry. According to Kynetec data, global demand for these compounds remains relatively limited. However, the "paper capacity" (planned or proposed capacity) of Chinese manufacturers has far exceeded actual market demand.​

"This is a typical overcapacity trap," Li noted. Many enterprises have noticed the opportunities brought by compounds with expiring patents, but not all of them understand that converting production capacity into sustained profits requires long-term strategic support. To compete in the global market, Chinese enterprises must not only master manufacturing technology but also address a series of complex issues, including toxicological research, metabolite data, regulatory reviews, and registration processes in major markets.​

Building Product Assets to Create Market Value​

The Concept of Product Assets​

Li believes that the transformation of Chinese pesticide enterprises toward new molecules should not be limited to selling technical materials; instead, they should focus on building "product assets" that can create value throughout the entire product lifecycle. "In a mature market like pesticides, product lifecycle management is crucial," he emphasized. New molecules require strategic positioning rather than mere low-cost production. The ability to delay a product's entry into the "long-tail phase" or maintain competitiveness through defensive pricing and formulation strategies is the key difference between high-value product assets and ordinary commodities.​

Shortcomings of Chinese Enterprises​

Regrettably, many Chinese suppliers have obvious shortcomings in this regard. "Too many enterprises stop at the production stage," Li pointed out. They fail to invest resources in developing differentiated formulations, accumulating global registration data, or providing local agronomic support—all of which are core elements in creating market value. Without these key links, enterprises struggle to form unique advantages in the market and can only be trapped in low-level price competition.​

Future Outlook: Mindset Shift and Strategic Innovation​

Currently, China's "anti-involution" policies have, to a certain extent, curbed vicious price competition in the pesticide industry and promoted industry consolidation. However, this has not fundamentally addressed the strategic gaps faced by many agrochemical enterprises. In the future, competition to dominate the market for post-patent-expiration products will no longer depend solely on an enterprise's ability to achieve large-scale production, but more on who can create and maintain product value.​

"To succeed in the next cycle, a mindset shift is required," Li concluded. Chinese pesticide enterprises must transform not only from manufacturers to marketers but also from passive price takers to value creators.​

It is predicted that global pesticide demand is expected to gradually recover around 2026. For Chinese pesticide enterprises, this represents a crucial development opportunity. Those that can successfully transform from imitation suppliers to strategic innovators may completely break free from the long-standing low-profit cycle plaguing the industry and carve out a broad niche for themselves in the global pesticide market.​