OREANDA-NEWS. Fitch Ratings says consolidation of China's crop-protection industry is likely to accelerate due to sluggish demand growth, weak prices, and more stringent government regulations.

China's crop-protection makers continue to be plagued by overcapacity, which limits profitability in the industry and drives consolidation, which is led by the larger companies with vertically integrated operations and strong R&D capabilities. The industry remains fragmented with the top 10 players accounting for 10% of total market revenue.

Government regulations, stemming from greater awareness of environmental impacts and food safety issues, will also accelerate industry consolidation. The Chinese government has introduced a number of measures, including raising the environmental standards for production, and cutting capacity additions for high-toxic and residue products, to control production and limit new entrants.

The government has also provided policy support to companies seeking acquisition opportunities overseas to advance China's crop protection industry. For example, China National Chemical Corporation, China's largest crop protection producer, received a 12-year EUR952m loan from China Import and Export Bank (A+/Positive) and received a CNY800m capital injection from the State-owned Assets Supervision and Administration Commission (SASAC) for its acquisition of Israel-based Adama Agricultural Solutions Ltd, a leading off-patent crop protection producer in 2011.