After
years of restructuring, the consolidation of China's monosodium glutamate
(MSG) industry appears to be coming to an end, according to CCM’s latest report, Corn Products China
News issued in July 2013.
The
MSG is a fermentation product with the high
energy consumption and the high pollution, which makes Chinese government
strictly limit its development. To tackle these problems, in 2011, the Ministry
of Industry and Information Technology of China (MIIT) issued a policy to call
for the elimination of older, inefficient plant technology that uses more energy
or creates more pollution than a specific industry average. 19 key industries
are involved, including the MSG industry.
The
MIIT data shows that China eliminated 84,000t/a of inefficient capacity in 2011
and another 143,000t/a capacity in 2012. A further 285,000t/a of capacity will
be eliminated in 2013. It is believed that the consolidation of the domestic
MSG industry will be completed within this year.
The
result has been a massive decline in the number of MSG producers and a major
shift in the center for MSG production. In the 1990s, there were more than 200
MSG companies in China. Now there are fewer than 50. Those which remain are
bigger and more efficient. Over the last two years, many small producers in the
Northern and Eastern areas of the country have closed down, leaving the center
of production in the Northeast, Northwest and Inner Mongolia. These areas enjoy
a good supply of raw materials and the energy needed to make MSG.
As
a result, by 2012 nine of China's top MSG producers had the capacity exceeding
100,000t/a. These nine companies had a combined capacity of 2,980,000t/a -
accounting for over 80% of China's total capacity of MSG. Three of the nine are
really huge, with more than 300,000t/a capacity and accounting for roughly half
of China's total capacity of MSG. They are Fufeng Group Co., Ltd.(Fufeng
Group), Meihua Holdings Group Co., Ltd. (Meihua Group) and Henan Lotus Flower
Gourmet Powder Co., Ltd. (Henan Lotus).
Normally,
big companies could further strengthen their leading positions as the
consolidation of the MSG industry undergoing. However, it will not be all
smooth sailing for the more efficient giant producers.
Although
many small MSG companies have been eliminated, the total domestic MSG capacity
is still increasing, due to capacity expansion by big companies. Fufeng Group's
MSG capacity reached 1,000,000t/a in 2012, and the company produced 970,000
tonnes of MSG - up 49% from 2011. Sales climbed 53% to 940,000 tonnes. As a
result, as for some big MSG companies which didn't expand their capacities,
their market shares are decreasing.
Increasing
capacity has also pushed down prices. Fufeng Group, the biggest MSG company in
China, adopted a low-price strategy to capture more market share. Fufeng
Group's 2012 annual report shows it sold MSG for 11% less in 2012 than it did
in 2011. Rising raw materials prices such as for corn also put pressure on the
profit margins. According to the annual reports of Fufeng Group, Meihua Group
and Henan Lotus, their profit margins of MSG business all show a down trend.
However,
there is no need to be pessimistic. In general, the consolidation is benefit
for the long term development for the MSG industry, and the profit margin of
MSG may witness a slight rebound in the near future.
Editor’s
note
Headlines
Supply
and demand
Consolidation
of domestic MSG industry drawing to an end
Crystalline
fructose industry faces both opportunities and challenges
Import
& export analysis
China's
mannitol export volume shows recovery in Jan.-May 2013
Chinese
corn products Imp. & Exp. analysis in May 2013
Price
update
Price
update of corn products in July 2013
Domestic
ex-work price of citric acid rebounded in June 2013
Ex-works
price of threonine declined in H1 2013
Market
and company dynamics
Baolingbao
to buy bank financial products with no more than USD65.25 million
Fufeng
Group makes the list of top 100 enterprises in light industries again
Policy
China
increases temporary reserve price of corn in 2013/2014
Chinese
government has approved two GM corns import
Competitiveness
Consumption
of wheat used as feed to decline this year
News
in brief
China
Starch's financial performance to decline in the first five months of 2013
USDC
launches preliminary administrative ruling on Chinese citric acid and citrate
Cargill
Luohe's high-fructose corn syrup project put into operation
Zhejiang
Fuel's bio-fuel ethanol project started
China
to complete the target of backward capacities elimination(2011-2015) ahead of
schedule
Longlive
Bio-technology launched a new functional food containing XOS
Two
researches of Longlive Bio-technology pass the approval of experts
Global
Bio-chem records a loss in H1 2013
Henan
Lotus Flower's brand value reached USD520 million
Sales
volume of Changshouhua corn oil ranks first for seven consecutive years
COFCO
Corporation made the list of the Fortune Global Top 500 enterprises again
Corn Products China News, a
monthly publication issued by CCM on 20th, features “Supply and
Demand”, “Import and Export Analysis”, “Price Update”, “Market & Company
Dynamics”, “Policy”, “Corn Supply” and other more information researched and
reported by CCM’s professional journalists. It is a reliable intermediate for
you to know more about the corn industry in China
CCM is dedicated to market research in China
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