Tuesday, February 18, 2014

Ex-works price of xanthan gum decreases sharply in 2013

The following factors forced producers to decrease the price of xanthan gum in 2013:

First of all, the increasing supply of xanthan gum. Tight supply caused higher prices in 2012, but expanding capacity led to oversupply in 2013. Deosen Biochemical Ltd. (Deosen Biochemical), Fufeng Group, Inner Mongolia Jianlong Biochemical Co., Ltd. and Meihua Holdings Group Co., Ltd. all put xanthan gum production lines into operation this year. Each of these production lines has a capacity of around 10,000 t/a.  And it is estimated that the new capacities of xanthan gum in 2013 totalled around 60,000 tonnes. The expansion intensified the competition in the xanthan gum market, so manufacturers had to decrease their prices to take up more market share.

Second, the slow growth in demand from overseas markets. Generally, China's xanthan gum is an export-oriented product. While, the demand growth of xanthan gum from overseas was not satisfied. The export volume of xanthan gum was around 102,000 tonnes during Jan.-Nov. 2013, just at the same level as that in 2012. Moreover, in May 2013, the US Department of Commerce imposed dumping margins on Chinese xanthan gum, ranging from 15.09% to 154.07%. The high anti-dumping margins negatively impacted the xanthan gum export.

Third, the less competitive advantage. In 2013, the price of guar gum, a substitute of xanthan gum, declined in the overseas market, especially since July. According to data from China Customs, the average import price of guar gum from India (China's major import origin of this product) was around USD4,993/t during Jan.-Nov. 2013, down from around USD6,533/t in 2012. The low price of imported guar gum attracted more downstream enterprises to use this product. China imported around 4,472 tonnes of guar gum from India in the first eleven months of this year, 1,074 tonnes more than that in 2012.

Fourth, the weak cost support. In 2013, the price of corn starch in China remained low and it has undergone a downtrend since Aug., due to the increasing supply of corn. In detail, the average ex-works price of corn starch in North China was around USD469/t in 2013, USD8/t lower than that in 2012.

It is predicted that the price downtrend of domestic xanthan gum will persist in 2014, due to further capacity expansion. Specifically, the third phase of the xanthan gum capacity expansion of Deosen Biochemical will be finished in early 2014. Then, the company's xanthan gum capacity will increase to around 90,000 t/a from present 78,000 t/a, becoming the largest producer of this product in China. Similarly, Fufeng Group also has a desire to enlarge the market share of xanthan gum.

Source: Corn Products China News issued by CCM in January.

Table of Contents of Corn Products China News 1401
China returns 2,000 tonnes of GM DDGS to the US
Chinese corn products Imp. & Exp., Nov. 2013
Export volume of China's furfural rebounds, Oct.-Nov. 2013
Price update of corn products, Jan. 2014
Review of the ex-works price of corn germ meal, H2 2013
Ex-works price of xanthan gum decreases sharply in 2013
Guangji Pharmaceutical suspends partial VB2 production line
Shandong Longlive opens online flagship shop at Tmall
Frequent outbreaks of avian influenza challenges poultry industry again
Edible ethanol industry undergoes downturn in 2013
Market price of wheat in China enjoys marked uptrend, June-Nov. 2013

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