Tuesday, July 9, 2013

Competition in domestic xylitol industry may be more intense in the near future

Actually, the overcapacity problem for the domestic xylitol industry at present is relatively serious. According to CCM's investigation, the total capacity of xylitol in China was over 132,000t/a while its national output was only about 67,000 tonnes in 2012, with an operating rate of just over 50%.

The overcapacity in the domestic xylitol industry can be attributed to two reasons as follows.

For one thing, high downstream concentration brought less opportunities to domestic xylitol producers to fully utilize their production capacity. For example, about 81% of the national output of xylitol was consumed by domestic downstream enterprises, and the consumption volume in the domestic sugar-free chewing gum industry accounted for about 86% of the domestic total in 2012. It is obvious that the development of the domestic xylitol industry depends on that of domestic sugar-free chewing gum industry. But in China the market share of sugar-free candy is so small that it limits the development of the domestic xylitol industry. In addition, high dependence on the domestic sugar-free chewing gum industry means that it is difficult for domestic xyltiol producers to sell their products to other downstream industries in China.

For another, some xylitol producers in China rely so much on their export business. But due to the global economic crisis, the demand for China's xylitol from the overseas market declined in 2012. According to China Customs, 11,523 tonnes of China's xylitol was exported to the overseas market in 2012, decreasing by 30.83% year on year. It is believed that the weak demand for China's xylitol from overseas market in 2012 also gave rise to the decline in the operating rate of some domestic xylitol producers, worsening the overcapacity.

Nevertheless, under the overcapacity pressure in the domestic xylitol industry, some enterprises still want to enter the domestic xylitol market, which will further aggravate the overcapacity problem of domestic xylitol industry. For example, Shandong Shenghao Biotechnology Co. Ltd. (Shandong Shenghao, a wholly-owned subsidiary of Shandong Sun Paper Industry Joint Stock Co., Ltd.) took its first step into the domestic xylitol market by investing about USD16.23 million in the establishment of a factory of crystalline xylitol with a capacity of 10,000t/a and of liquid xylitol (50%) with a capacity of 4,000t/a in 2012. And in Jan. 2013, Zhumadian Tianfang Biological Engineering Co., Ltd. (Zhumadian Tianfang) invested as high as USD259.74 million to build a factory, including a production project on xylitol with a capacity of 40,000t/a.  

Once the production projects above come into play, it is likely that the competition in the domestic xylitol industry will become more intense in the near future. On the contrary, it is predicted that the demand for China's xylitol both from home and abroad will not see a significant increase in the near future. The problem of the high downstream concentration is the first obstacle that the domestic xylitol industry should tackle, but it takes time to explore new downstream industries.

The intense competition of domestic xylitol industry finally has a negative effect on the producers' profit. In order to expand their market share, domestic xylitol producers would better decrease their product prices. Since 2012 the average ex-works price of crystalline xylitol in China has shown a downtrend from USD4,417/t in Jan. 2012 to USD4,233/t in May 2013. Though the cost of its raw material–corn cob–was also on a decrease, but the decrease rate was unable to keep pace with the one of xylitol's price. The average ex-works price of corn cob in China was USD77/t in 2012, but it just decreased to USD73/t in the first five months of 2013. It is obvious that by selling the same volume of xylitol domestic xylitol producers gained less net profit than before.

Therefore, more intense the competition in the domestic xylitol industry will be more difficulties in selling the xylitol and lower prices of China's xylitol there will be. In the near future, the price of China's xylitol may continue to decline, leading some producers to withdraw from the industry.

Table of Contents of Sweeteners China News 1307:
Global Sweeteners: collaboration with ADM on selling sweetener products
Changzhou Hanbang launches crystalline neotame
Xiwang Sugar sells its corn processing business
China Starch issues a profit warning
Shandong Longlive launches new kind of food with XOS
Crystalline fructose industry: rapid development in recent years but still challenges in near future
Competition of domestic xylitol industry may be more intense in the near future
Overheating investment in domestic sucralose industry should be noticed
QHT acquires two letters patent on functional oligosaccharide
Growth rate of import volume of liquorice declines in first five months of 2013
China's mannitol: Export volume increases while import volume decreases in Jan. -May of 2013
China exports over 93 tonnes of mogroside in 2012
China's maltitol: export volume decreases by 16.94% YoY in Jan. -April of 2013
Export overview of some sweeteners and raw materials in China, May 2013
Over 33,000 tonnes of HIS consumed in China in 2012
More syrup consumed by China's candy producers to replace sucrose in 2012
China's import volume of sucrose still large from Jan. to May 2013
Strong management on infant formula may improve indirectly consumption of FOS in China
Ex-factory prices of sweeteners in China in June 2013

Sweeteners China News, issued by CCM on 5th every month, offers timely update and close follow-up of market and company dynamics based on China’s sweeteners industry. It also releases the latest information on raw material supply, price update, import & export analysis as well as consumption trend & competitiveness.

CCM is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals, CCM offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis, and Consultancy Service. 

For more information, please visit http://www.cnchemicals.com.

Guangzhou CCM Information Science & Technology Co., Ltd.
17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou 510070, China
Tel: 86-20-37616606
Email: econtact@cnchemicals.com

No comments: