It is predicted that the competition in the
domestic xylitol industry will become increasingly intense in the near future
because of the relatively serious overcapacity at present and more new
production capacity to be launched in the near future, according to Sweeteners
China News, issued by CCM in July.
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.
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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
CCM is dedicated to market research in China
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