Corn Products China News Sample

Copyright © CCM International Limited

Corn Products China News

Vol.3 Issue 1, 2010

Corn Products

Corn Products China NewsVol. 3 Issue 1. 2010 Publication date: 20 January, 2010

News in Berief1 NDRC to release grain and oil reserve when necessary

1 Global Bio-chem witnesses poor performance

1 RiboflavinPlantofGuangjiPharmaceuticaltolaunch

1 EU continues to impose anti-dumping tax on furfuryl alcohol

1 Miller Biotechnology launches 5,000t/a furfural plant

Supply & Demand2 China imposes deposits on nucleotide imports

3 India: China’s largest citric acid export destination

4 Gloomy xylitol exports in 2009

Price Update5 Furfural price witnesses uptrend recently

7 Ex-factory prices of corn products in Jan. 2010

7 FOB corn price in Dalian Port from Feb. 2009 ~ Jan. 2010

8 Maltose syrup price rises in Jan.

Market & Company Dynamic9 COFCO develops whole-industry-chain strategy

9 AnhuiBBCAtoseelargeprofitrisein2009

10 China reduces fuel ethanol import tariffs to 5%

11 Baolingbao to enlarge erythritol capacity to 4,000t/a

12 China Corn Oil gets listed in HK

13 Henan Agric. becomes Henan Lianhua’s biggest stockholder

14 Nantong Jiuding obtains governmental funds for PLA expansion

Competitiveness15 Corn-based edible alcohol price decreases

Corn Supply16 Overview of Chinese corn exports in 2009

16 Chinese seed companies eye transgenic corn

Corn Products Use Monitoring18 “Vita Sugar” formally launched in China

CONTENTS

Welcome to the January issue of CornProducts China News, specially published by CCM International.

New Report Announcement

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Combines CCM’s 7-year expertise in stevia market research

Give you an overview from stevia planting, stevia sweeteners to stevia consumption

Key analysis includes:☆ Output & Distribution☆ Supply & Demand☆ Opportunities & Forecast☆Majorproducersetc.

To view the main content and sample pages here

Please also keep close eyes at CCM’s coming report:Enzyme China ReportXylose China Report

Contact us for more information at [email protected]

With ultimate establishment of China-ASEAN Free Trade Zone (including such ten members as Brunei, Indonesia, Malaysia, Singapore, Philippine, Thailand, Vietnam, Laos, Myanmar and Cambodia ), zero tariff for 90% products has been implemented since Jan.1st, 2010, which is a double-edged sword for Chinese corn processing industry, bringing in both opportunities and challenges, with benefit more than detriment.

Export volume of Chinese corn processing products such as alcohol, citric acid, MSG and VC will witness increase. For some products heavily depending on export to US and EU, the zero tariffs will inevitably relieve their dependence.

Some corn processing products with overcapacity may be shifted to ASEAN, since China has taken measures to curb excessive expansion of some corn processing products capacity since late 2009. Therefore, the ultimate formation of China-ASEAN will attract more Chinese investors to build plants there.

Besides, Chinese imports of cassava, a raw material of fuel alcohol, will see increase, sinceASEANisthemajorplantingareaofcassava, such as Thailand. As cassava is a non-grain crop, increasing imports will contribute a lot to Chinese grain safety, since most fuel ethanol in China is made from corn.

Increasingly intense competition will stand out among Chinese corn processing enterprises.

mailto:?subject=

http://www.cnchemicals.com/reports/0009S014/0009S014_1_starch.shtml

Corn Products China News Vol. 3 Issue 1. 2010

CCM International Limited www.cnchemicals.com1

Corn Products China News at a glance News in Berief

1

China has made its preliminary determination to impose deposits on nucleotide food additives imported from Thailand and Indonesia since early January.

India might become the largest export destination of Chinese citric acid in 2009.

Chinese xylitol exports have been gloomy in 2009, due to the global weak demand for xylitol caused by global economic crisis.

Furfural price has seen uptrend in recent two months.

Maltose syrup price keeps rising in Jan. 2010, thanks to climbing price of corn and sucrose.

COFCO was working hard on developing its whole-industry-chain strategy in 2009 and continues this strategy in 2010.

AnhuiBBCApredictsthatitstotalnetprofitin2009willsoarby340%over 2008.

China reduces fuel alcohol import tariffs to 5% from previous 30% in 2010.

Baolingbao is planning to enlarge its erythritol capacity to 4,000t/a by mid 2010 from current 1,000t/a.

China Corn Oil got listed in Hong Kong in Dec. 2009, in order to raise funds for its further development in the following three years.

Henan Agric. has become the biggest stockholder of Henan Lianhua in mid Dec. 2009.

Nantong Jiuding received funds of USD1.4 million for its 20,000t/a PLA projectfromNDRCinlateDecember,2009.

Corn-based edible alcohol price has witnessed decrease since early Jan. 2010, pulled down by declined molasses-based edible alcohol price.

China has seen weak exports of corn during 2009.

Chinese leading seed companies have more confidence in enlarging investments in transgenic corn industry as China has formally approved production and application safety certificate to phytase transgenic corn recently.

“Vita Sugar” has been formally launched in China since late 2009.

NDRC to release grain and oil reserve when necessary

National Development and Reform Committee (NDRC) announced on 10th January 2010 that the grain and oil

reserve will be released if their prices rise sharply resulting from transportation barrier caused by heavy snow and rain. According to NDRC, all local pricing departments should make efforts to keep the adequate supply of vital goods, such as grain and oil, and maintain their prices at a relatively stable level.

Global Bio-chem witnesses poor performance

Global Bio-chem Technology Group Company Limited (Global Bio-chem) is anticipated to see poor performance in 2009,

coinciding with its brothers Global Sweeteners Holdings Limited (Global Sweeteners), with reduced orders and price caused by global financial crisis. However, this situation has improved to some extent, since prices of sucrose and corn starch have increased by 50% and 38% respectively.

RiboflavinPlantofGuangjiPharmaceutical to launch

Hube i Guang j i Pharmaceut i ca l Co . , L td . (Guang j iPharmaceutical)launcheditsriboflavinprojectwithcapacity

of2,500t/aon19Dec.2009.ThisprojectisinvestedbyGuangjiPharmaceutical (Mengzhou)Co.Ltd.,a subsidiaryofGuangjiPharmaceutical, which will enhance the competitiveness of riboflavinforGuangjiPharmaceutical.

EU continues to impose anti-dumping tax on furfuryl alcohol

European Commission has reportedly decided to continue the anti-dumping tax imposed on Chinese furfuryl alcohol until

10th December 2011, with tax rate ranging from €84 to €250 per tonne.

Miller Biotechnology launches 5,000t/a furfural plant

On 23 December 2009, Qingtongxia Miller Biotechnology Co., Ltd. (Miller Biotechnology) launched its 5,000 t/a furfural

plant in Qingtongxia City, Ningxia Province, which will consume 75,000 tonnes corn cobs per year and generate annual sales revenue of USD6.6 million for Miller Biotechnology. The products produced in this plant are mainly used in medical and chemical industries.

Main companies mentioned in this issue



The Ministry of Commerce of China (MOFCOM), on Jan. 4th,

2010, announced its preliminary determination to impose deposits on nucleotide food additives, important flavor enhancer, imported from Thailand and Indonesia from Jan.5th, 2010 .

MOFCOM launched anti-dumping investigations into the nucleotide food additives originated from Thailand and Indonesia on Mar. 24th, 2009 and confirmed that the imported products had caused great damages to domestic sector.

In the preliminary determination, nucleot ide food addit ives with deposits imposed include disodium 5 ' - I n o s i n a t e ( I M P ) , d i s o d i u m 5'-Guanylate(GMP) and disodium 5'-Ribonucleotide (I+G). Actual required deposits will be decided according to the dumping margin of different producers (TABLE 1).

Although the deposit is relatively low, it certainly will impair the price advantage of nucleotide from Indonesia and Thailand to some extent and cut the exports, thus leaving some market shares to domestic enterprises.

After this anti-dumping measure is carried out, Guangdong Zhaoqing Star Lake Bioscience Co., Inc. (Star Lake), domestic largest nucleotide producer with capacity of 6,000t/a, will be able to gain price advantage and become the biggest beneficiary, who has endeavored to capture domestic

nucleotide market shares left by Thailand and Indonesia nucleotide e n t e r p r i s e s . S i n c e M a r . 2 0 0 9 , nucleotide enterprises of Thailand and Indonesia have begun to largely cut nucleotide exports to China due to the antidumping investigation. Star Lake thus could take up over 50% of domestic total nucleotide consumption in 2009.

Star Lake used to suffer great pressure from the low-priced nucleotide products imported from Thailand and Indonesia.Toprotectitsownbenefits,Star Lake applied for antidumping

investigation into imported nucleotide in Feb. 2009.

At present, Star Lake is planning to expand its nucleotide capacity to improve competitiveness. For example, the company will expand I+G capacity to 4,000t/a in Zhaoqing C i t y , G u a n g d o n g P r o v i n c e , b y utilizing the fund of USD70 million raised from its non-publicly issued 50 million shares, as demand for I+G is thriving. It was estimated that domestic I+G demand was up to 11,000 tonnes in 2009 and will increase in 2010. However, total nucleotide capacity in China is only 9,000t/a in China currently.

To cope wi th the ant idumping measure, South Korea CJ Group, whose nucleotide food additives sourced from Indonesia and Thailand plants have been imposed deposits,

has built a 3 ,000t/a nucleotide production line in Liaocheng City, Shandong Province in 2006, thus its

products can be exempted from the deposits. In the world, there are three largest nucleotide producers, including South Korea CJ Group with capacity of9,000t/a,JapanAjinomotoGroupCo., Ltd. (JapanAjinomoto)withcapacity of 8,000t/a and Stake Lake.

Actually, South Korea CJ Group and JapanAjinomotohaveencounteredChina’s anti-dumping investigations twice. Stake Lake first applied for antidumping investigation into South KoreaCJGroupandJapanAjinomotoin 2005 and Stake Lake won the case. The result was that nucleotide food additives from South Korea and Japan imported by South Korea CJ Group and JapanAjinomotowasimposed deposits. After then, the two companies shifted their production to Thailand and Indonesia to avoid antidumping measures from China and continued to dump the products into China, which drove Stake Lake to apply for a second antidumping investigation.

Star Lake, a state-owned fermentation company established in 1992 in Guangdong Province of China, is China’s leading nucleotide and

threonine producer.

Established in 2004, Liaocheng CJ, wholly owned by South Korea CJ (a leading food company in South Korea), is engaged in lysine and nucleotide production, with the most advanced fermentation technology in the world.

TABLE 1: Different deposit margins on Thailand and Indonesia nucleotide enterprises in China

Indonesia Thailand

Enterprises Deposit rate Enterprises Deposit rate

PT. Cheil Jedang Indonesia16.90% AjinomotoCo., (Thailand)

Ltd.6.50%

PT. Kirin Miwon Foods 8.10% All Others 29.70%

All Others 29.70% - -

Source: MOFCOM

China imposes deposits on nucleotide imports

Supply & Demand



India: China’s largest citric acid export destination

India has totally imported 48,814 tonnes citricacidfromChinainthefirsteleven

months of 2009(FIGURE 1), which was probably China’s largest citric acid export destination in 2009.

Though China Customs hasn’t released the export data for Dec. 2009, it is sure that India has witnessed large rise in import volume of Chinese citric acid in 2009. In 2008, India totally imported 31,966 tonnes citric acid from China, ranking the fourth among all the export destinations of Chinese citric acid (TABLE 2).

Before 2009, the US and some countries ofEUweremajor export destinationsof Chinese citric acid and their import volumeplummetedin2008.TheUSjustimported 9,123 tonnes citric acid in the first eleven months of 2009, down 87% year on year. EU and the US have levied high anti-dumping duties on Chinese key citric acid producers respectively since Jun. 2008 and Sep. 2008. This has impaired the price advantage of Chinese products marketed in EU and US, leading to export volume decrease of Chinese citric acid products.

After encountering anti-dumping duties imposed by EU and US, Chinese citric acid producers have raised the exports in other countries like India and Turkey and developed some new markets in Africa and South America in 2009, which is one of the reasons for the export increase to India.

Price advantage of Chinese citric acid, especially in 2009, is another key reason for large export volume of Chinese citric acid to many countries. Average export price of citric acid exported to India during Jan.~Nov. 2009 was about USD701/t, USD266/t lower than that in the same period of 2008. Although corn price has maintained at a high level in 2009, Chinese citric acid producers still cut the price to boost exports as their business has

beenhitheavilybyglobalfinancialcrisis.Besides, India, with the second largest population in the world, has seen increase in citric acid consumption in recent years.

China is the world’s largest citric acid producer, constituting around 60% of the world’s total output. Depending on lower production cost than that of other countries, domestic producers export most of their citric acid. China in Jan.~Nov. 2009 totally exported citric acid of 596,614 tonnes that accounted for over 80% of China’s total output in 2009.

However, heavy dependence on export of Chinese citric acid will do no good to the industry development in the long run. In the near future, the government might take measures to boost domestic consumption and regulate domestic citric acid industry through limiting blind capacity expansion like that in MSG or VC industries. That might ultimately lead to citric acid capacity concentration in some large-scale producers.

Overcapacity of citric acid industry in China has resulted in vicious price war among producers in recent years, contributing to the low price to some extent. The low price has led to repeated anti-dumping investigation into domestic citric acid producers from many countries in the last few years, such as Thailand, South Africa, India, Egypt, Ukraine, etc. Among these countries, India and South Africa withdrew the investigation at last but it is not sure whether India will continue to launch anti-dumping investigation into Chinese citric acid in the future.

Domestic citric acid price started to increase in late Dec. 2009, resulting from the intense domestic supply as demand for overseas citric acid has been constantly increasing. Monohydrate citric acid price has been up to USD951/t in late Dec. 2009, up USD146/t over previous month. Citric acid price will continue to increase driven by current increasing price of corn and sulphuric acid.

FIGURE 1: MajorexportdestinationsofChinesecitricacid,Jan.~Nov.2009

48,814

28,139 28,030 25,069 24,101

0

10,000

20,000

30,000

40,000

50,000

60,000

India Turkey Japan Holand Russia Federation

(Un

it: t

on

ne)

Source: China Customs

TABLE 2: Top export destinations of Chinese citric acid, 2006~2008Export

destinations2008, tonne 2007, tonne 2006, tonne

US 71,739 67,603 64,189

Japan 35,748 30,588 28,296

Holland 34,215 42,627 23,571

India 31,966 34,465 26,072

Belgium 20,348 32,215 24,540

Source: China Custom



Gloomy xylitol exports in 2009

Chinese xylitol exports have been gloomy in 2009, due to the global

weak demand for xylitol caused by global economic crisis.

Both xylitol export volume and price decreased during the first eleven months of 2009. According to statistics from China Customs, China totally exported 15,293.07tonnesxylitolinthefirstelevenmonths of last year, down approximately 11% year on year. And xylitol export price kept downtrend during the first eleven months of 2009. Average export price of xylitol in Nov. 2009 hit USD2,380/t, down around 25% over the same period of 2008 (FIGURE 2).

The export volume drop is caused by declined xylitol demand globally since early 2009.

Xylitol as a low-energy sweetener is widely used in chewing gums and health products. With the public’s decreasing purchasing power to consume such products in H1 2009, xylitol demand thus decreased. Though H2 2009 witnessed gradual rebound in global overal l economic situation, xylitol demand still remained unchanged. Actually, xylitol demand has been quite stable in recent years.

The export price downtrend of xylitol was mainly due to the depressed demand for xylitol and vicious price competition among xylitol producers. Actually, xylitol has seen overcapacity in China since 2007, thus leading to intense competition. Some xylitol producers initiated export price cut to capture market shares in 2009.

Apart from that, the government has raised xylitol export tax rebate to 9% since Dec. 2008 from original 5%, which also resulted in the decrease in xylitol export price.

Additionally, decrease in raw material price also counts. In China, most corn cob s are used in xylitol and furfural production. Owing to low furfural price during Jan. ~ Oct. 2009 that caused its low operation rate, demand for corn cob declined and its supply for xylitol production was abundant, facilitating xylitol price drop.

However, xylitol price has begun to rise since this January, mainly attributed to the increasing corn cob price. At present,

FIGURE 2: Xylitol export volume and price in China, Jan. ~ Nov., 2009

2,100

2,200

2,300

2,400

2,500

2,600

2,700

2,800

2,900

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

(Un

it: U

SD

/t)

(Un

it: t

on

ne)

Export volume Export price


FIGURE 3: Top ten export destinations of Chinese xylitol, Jan. ~ Nov., 2009

4,219

2,736

1,674 1,657

974 828 720 448 290 264

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

US Japan South Korea

Turkey Denmark Italy Poland Holland Vietnam Thailand

(U

nit: U

SD

/t)

(U

nit: to

nn

e)

Export volume Export price


FIGURE 4: Export regions of xylitol in China, Jan. ~ Nov., 2009

8,215

4,663

1,193

429

281

186

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Dezhou

Quzhou

Anyang

Qingdao

Tianjin

Shijiazhuang

(Unit: tonne)




furfural industry is rebounding, which largely pushes up corn cob demand.

China is the world’s largest xylitol producer, with over 50% of its products exported to such oversea countries as US, Japan, South Korea and EU, etc. (FIGURE 3). The US is always the largest export destination, with its xylitol import volume of 4,219 tonnes from China during Jan. ~Nov. 2009, down 9% year on year. Japan is the second largest one, with total import volume of 2,735 tonnes, down 20% over the same period of 2008.

Currently, China has about eleven xylitol producers (TABLE 3), mostofwhichare locatedinShandongProvinceandZhejiangProvince ( FIGURE 4).

Though xylitol consumption in China has been increasing in recent years as more and more people are aware of xylitol’s benefits in decayed tooth prevention, many xylitol producers prefertoexportxylitolforhigherprofit

TABLE 3: Ke y xylitol producers in China, 2009

Producer Capacity’ 09, tonne Location

Futaste Pharmaceutical Co., Ltd.40,000

Dezhou City, Shandong Province

Shandong Longlive Bio-technology Co.,Ltd.35,000

Dezhou City, Shandong Province

ZhejiangKaihuaHuakangPharmaceuticalCo.,Ltd.20,000

QuzhouCity,ZhejiangProvince

Shandong Gaomi Tongli Chemical Co., Ltd.8,000

Gaomi City, Shandong Province

Total103,000

-

Source: CCM International

Furfural price witnesses uptrend recently

Domestic furfural price has witnessed uptrend since early November 2009, which stayed at a low price level in previous 10 months of 2009, boosted by price increase of furfuralcohol and corn cob.

The price increase extent of furfural varies in different areas. For instance, average price of furfural in North China, the key furfural production area, has increased to USD1, 245.06/t on Jan. 13th, 2010, up 21.43% over USD1, 025.34/t on Oct. 1st, 2009 (FIGURE 5).

The following two factors may contribute to furfural price increase.

Firstly, rising furfuralcohol price is the key factor. In early October 2009, furfuralcohol price has begun to rise. On Jan. 13th, 2010, average price of furfuralcohol in North China has increased to USD1,457/t, up 42.15% over that on Oct. 1st, 2009 (FIGURE 6).

A c t i v e d e m a n d f o r f u r f u r a l c o h o l from furan resin, one main building

construction material, is the key factor driving furfuralcohol price up. With brisk market of real estate in China currently, more than 50% furfural i s used to produce furfuralcohol and around 85%

of furfuralcohol is used to produce furan resin.Secondly, rising price of corn cob (FIGURE 7), raw material of furfural, has increased production cost of furfural, pushing

FIGURE 5: Average price of furfural in North China, Oct. 2009~Jan. 2010

1,025 1,025 1,000

962

1,025

1,077 1,113

1,172

1,245

800

900

1,000

1,100

1,200

1,300

1-Oct-09 14-Oct-09 27-Oct-09 9-Nov-09 22-Nov-09 5-Dec-09 18-Dec-0931-Dec-09 13-Jan-10

(Un

it: U

SD

/t)


Price Update



furfural price up. At present, corn cob price in North China has increased. For instance, in Henan, the price has increased to USD65.91/t on Jan. 13th, 2010, up 125% over that on Oct. 1st, 2009. Jilin and Ningxia also witnessed price increase, with respective growth rate of 96.36% and 100%.

Although furfural price has been increasing since early November 2009 domestically, insiders predict that it will maintain the current level or slightly increase in the near future, as Chinese government has always been working hard on price control of house and formulated related policies to control the high price in late 2009, and the demand from furan resin may decline, thus pulling down the furfuralalcohol and furfural price.

FIGURE 6: Furfuralcohol price in North China, Oct. 2009~Jan. 2010

1,025

1,099

1,143 1,172

1,230 1,260

1,318

1,392

1,457

1,000

1,100

1,200

1,300

1,400

1,500

1-Oct-09 14-Oct-09 27-Oct-09 9-Nov-0922-Nov-09 5-Dec-09 18-Dec-0931-Dec-0913-Jan-10(U

nit

: U

SD

/t)


FIGURE 7: Average price of corn cob in Hebei, Shandong and Ningxia,

Oct. 2009 ~ Jan. 2010

0

10

20

30

40

50

60

70

1-Oct-09 14-Oct-09 27-Oct-09 9-Nov-09 22-Nov-09 5-Dec-09 18-Dec-09 31-Dec-09 13-Jan-10

（U

nit

: U

SD

/t）

Jilin Henan Ningxia




Ex-factory prices of corn products in Jan. 2010

Products

Price in January 2010 Price in December 2009

(USD/t) (RMB/t) (USD/t) (RMB/t)

Corn starch (North China) 374 2,550 359 2,450

Corn starch (South China) 409 2,790 394 2,690

Ethanol (Industrial grade) 615 4,200 586 4,000

Ethanol (Food grade) 842 5,750 828 5,650

80% Maltose syrup 396 2,700 374 2,550

70% Sorbitol 549 3,750 535 3,650

Monohydrate citric acid 791 5,400 755 5,150

Oxidized starch(Food grade) 821 5,600 821 5,600

68% Xylitol (Liquid) 842 5,750 850 5,800

HFCS (Fructose: 42%) 396 2,700 381 2,600

HFCS (Fructose: 55%) 498 3,400 498 3,400

Crystal Isomaltitol 3,326 22,700 3,179 21,700

Maltodextrin 527 3,600 462 3,150

75% Maltitol (Liquid ) 784 5,350 777 5,300

Anhydrous glucose (Food grade) 718 4,900 703 4,800

Glucose Monohydrate 549 3,750 491 3,350

Itaconic acid 1,758 12,000 1,788 12,200

98.5% lysine 2,066 14,100 2,308 15,750


FOB corn price in Dalian Port from Feb. 2009 ~ Jan. 2010

19-Feb 18-Mar 13-Apr 14-May 11-Jun 20-Jul 20-Aug 20-Sep 20-Oct 20-Nov 14-Dec 19-Jan

Corn price 222 240 239 238 242 250 253 259 252 258 262 270

210

220

230

240

250

260

270

(Un

it: U

SD

/t)




Maltose syrup price rises in Jan.

Domestic maltose syrup price keeps rising in Jan. 2010 (FIGURE 8),

pushed by increasing price of corn and sucrose. Maltose syrup price is estimated

to maintain uptrend to this February with Chinese New Year approaching.

Current ex-factory price of 75% maltose syrup is USD344/t, up 7% over last month, and nearly 12% higher than that in Oct. 2009, quoted by Zhucheng Xingmao Corn Developing Co., Ltd. (Zhucheng Xingmao), China’s leading maltose syrup producer. Maltose price reached the peak in Aug. and Sep. 2009, mainly attributed to the consumption peak season of maltose syrup during this period in China.

Price increase of maltose syrup is mainly attributed to following reasons.

Firstly, increasing production cost results in maltose syrup price up. Price of maltose syrup, a corn deep processing product, is always influenced by corn price. With increased corn price caused by boosting demand from feedstuff industry in Northeast China, corn price in Shangdong slightly increased to USD272/t (FIGURE 9) in mid. Jan. 2009. In fact, most of maltose syrup producers are located in Shandong. Additionally, current intense logistics and transportation barrier caused by heavy snow have limited maltose syrup producers to purchase corn from Northeast China. As a result, they have to purchase corn locally or in Hebei Province with higher price, thus pushing up the

corn price.

Secondly, pushed by increasing price of sucrose, price of maltose syrup as a

substitute of sucrose also increases . Sucrose price has been up to USD812/t on Jan. 15th, 2010, up 8% over early Dec. 2009 (FIGURE 10). Besides, the speculation of sucrose output reduction propelled many purchasers to increase their purchasing volume, resulting in its price uptrend.

Though China has released the stored sucrose to control the excessively high sucrose price in the market since Dec.

2009, the measure didn’t take much effect. According to some insiders, it is difficult for some enterprises to purchase

enough sucrose due to short supply .

FIGURE 8: Ex-factory price of maltose syrup in China, Jul., 2009 ~ Jan., 2010

240

260

280

300

320

340

360

380

Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10

(Un

it: U

SD

/t)


FIGURE 9: Corn price in Shandong Province, Oct., 2009 ~ Jan., 2010

248

252

256

260

264

268

272

276

2-Oct 12-Oct 22-Oct 1-Nov 11-Nov21-Nov 1-Dec 11-Dec 21-Dec31-Dec10-Jan20-Jan

(Un

it: U

SD/t

)


FIGURE10:SucroseforwardpriceinBeijingcity,Oct.,2009~Jan.,2010

703 703

720729 732

776

805 802 808

820

680

720

760

800

840

15-Oct 25-Oct 4-Nov 14-Nov 24-Nov 4-Dec 14-Dec 24-Dec 3-Jan 13-Jan

(Un

it: U

SD

/t)

Source: www.ifeng.com



Thirdly, increasing demand for candy and biscuit drives maltose syrup demand up. With approaching of Chinese New Year in mid Feb. 2010, demand for candy and biscuits

is increasing, which drives maltose syrup price up .

Maltose syrup price will continue increasing till February. If sucrose price continues to go up, maltose syrup price

will also rise.

In China, there are two large-scale maltose syrup producers, namely Zhucheng Xingmao and Qingyuan Foodstuff Co., Ltd., both located in Shandong. Maltose syrup is widely used in food like candy, biscuit and beverage as sweetener in China.

COFCO was working hard on developing its whole-industry-chain strategy in

2009 and will continue so in 2010. Under this strategy, the company has experienced

reorganization and expansion in 2009.

Mr. Ninggaoning, chairman of COFCO in 2009 put forward a strategy of whole-industry-chain development on the basis of its current businesses covering grain, oil and foodstuff, signifying COFCO will largely extend its industrial chain mainly in grain and oil, its core business. “Whole-industry-chain” means that COFCO will supervise the whole production process from raw materials to end products so as to guarantee product quality.

COFCO has been dedicated to expand and complete its industry chain. In order to march into dairy industry, COFCO cooperated with HOPU Investment Management Co., Ltd. to purchase 20% stake of China Mengniu Dairy Co. Ltd. (Mengniu), the leading dairy producer in China on Jul. 6th, 2009, with total investment of USD1 billion (Corn Products

China News 0907, P12). As for starch sugar industry, COFCO s u c c e s s f u l l y p u r c h a s e d R o n g s h i Biotechnology Biological Technology Co., Ltd. (Rongshi) on Jul. 24th, 2009, which is one of the leading corn processing enterprises inMiddleChinawithmajorproducts of starch sugar, corn oil, etc.

Besides, developing self-brand and new products is also parts of its whole-industry-

chain strategy. COFCOfirstlymarketeditsself-brandjuicedrink“Lohas”inChinain2009, which is mainly distributed in high-end beverage market. The raw material of “Lohas” was strictly controlled by COFCO to ensure the quality of this self-developed

product.

Additionally, COFCO in Aug. 2009 set

up a website for Business to Customer service, called “Wo Mai Wang” in Chinese. Customers can purchase almost all the products of COFCO conveniently through

logging in the website. Besides, Mengniu’s dairy products have also been marketed in this website since Jan. 2010.

COFCO has become a senior sponsor of Expo 2010 Shanghai since July 2009, in order to promote its self-brand reputation. D u r i n g t h e E x p o 2 0 1 0 S h a n g h a i , COFCO will freely support its self-brand products like “Fortune” of edible oil and

“Greatwine”.

In July, 2009, COFCO developed corn oil with 13,000ppm phytosterol, and then marketed it in many provinces of China. This new product has become a competitor

f or “Arowana” branded corn oil with 10,000ppm phytosterol of Yihai Kerry Investment Co, Ltd. (Yihai Kerry).

In 2010, COFCO will continue the whole-industry-chain strategy, and is expected to get returns from the large investments in 2009. At present, COFCO is planning to cooperate with Shaanxi Surea (Group) Co.,

Ltd., who is the leading grain processing enterprise in Northwest China. This cooperationwillbenefitCOFCOtofurthercarry out its whole-industry-chain strategy in Northwest China in the near future.

Anhui BBCA Biochemical Co., Ltd. (Anhui BBCA), China’s leading biochemical enterprise, forecasts that its total net

profitin2009willreachUSD35million,upby340%over2008,thanks todecreasedproductioncostofAnhuiBBCA’smajor

product s like fuel ethanol, lysine and citric acid, as well as rising demand for fuel alcohol in 2009.

Despite impacts from global economic crisis during 2009, Anhui BBCA still made great achievements, thanks to following several factors.

Firstly, technology upgrade has largely cut down production cost. For example, grain consumption volume of lysine and citric acid

production in 2009 has been cut by 7.4% and 3.4% respectively compared with that in 2008. Another reason for the production cost decline is that the company mainly purchases corn from North China and Huang-Huai area instead of Northeast China. Since the government purchased 40 million tonnes corn for storage in Northeast China from late 2008 to early 2009, corn price in Northeast China had maintained high level but the price was still relatively low in North China and Huang-Huai area.

Secondly, Anhui BBCA successfully developed new market in Asia with price advantage after its citric acid encountered anti-dumping duties from US and EU, which has offset the loss of a big cut in citric acid exports to these areas.

COFCO develops whole-industry-chain strategy

AnhuiBBCAtoseelargeprofitrisein2009

Market & Company Dynamic



China reduces fuel alcohol import tariffs to 5%

Inaddition,AnhuiBBCA,asoneofthenationalfourmajorfuelalcohol suppliers,hadenjoyed fuel ethanol salesvolumeupabout 1.6% in 2009. Domestic fuel alcohol consumption has largely risen in 2009, driven by the increased consumption of car. In China, fuel alcohol is usually added to petrol with mixing proportion of 90% for oil and 10% for fuel alcohol. In 2009, China issued related policies on boosting domestic car consumption to stimulate economic development against the backdrop of worldwide gloomy economic situation.

Besides, Anhui BBCA can obtain subsidy of USD300/t for its fuel alcohol production in 2009 from the government, though the subsidy amount declined from the previous USD319/t.

Considering great achievements of Anhui BBCA in 2009, China Agri-Industries Holdings Limited (China Agric, a listed company of COFCO in Hong Kong, mainly engaged in the food and processing industry) is likely to acquire Anhui BBCA in 2010. Both China Agric and Anhui BBCA are subsidiaries of COFCO, and COFCO has given priority to China Agric for Anhui BBCA acquisition. But China Agric. had no intention before as Anhui BBCA’sprofitabilitywasnotsogoodinrecentyears.

Once Anhui BBCA is acquired by China Agric., Anhui BBCA will enjoyrapiddevelopmentwiththesupportsfromChinaAgric.

Anhui BBCA mainly produces corn-based fuel alcohol, lysine and citric acid, with capacityof 440,000t/a, 45,000t/a and 180,000t/a separately.

Import tariff of fuel alcohol in China has been reduced to 5% from Jan. 1st, 2010, from previous 30%, according to the

promulgation by Tariff Commission of the State Council (TCSC) in late December 2009.

This reduction is in accordance with the agreement made in 2001 withChina’sentryintoWTO,andalltheWTOmemberscanenjoy

this tariff privilege.

Insiders view that the tariff reduction will attract more foreign producers to export fuel alcohol to China, which will bring impacts on domestic immature fuel alcohol industry since overseas producers have advantages in fuel alcohol production technology. Taking this into consideration, they also predict that Chinese government may levy 5% excise tax on imported fuel alcohol to protect domestic fuel alcohol industry in the future.

Longing for entering Chinese fuel alcohol arket for a long time, Brazilwillbeamainbeneficiaryfromthistariffreduction,sinceitis the largest fuel alcohol producer and exporter in the world, with

output and export volume of 28.50 million tones and 3.0 million tonnesrespectivelyin2009.MajorexportdestinationsofBrazil’s

fuel are the US, Venezuela and Nigeria, etc. China has large market potential for fuel alcohol. According to the plan of ‘Medium and Long-term Development Plan for Renewable Energy’ made in June 2007, China has planned to increase fuel

alcohol consumption to 2.5 million tonnes by the end of 2010. However, there were only 10 provinces using fuel ethanol with alcohol content of 10% in China in 2009, with total consumption

volume of 1 million tonnes (PICTURE 1).

PICTURE 1: Distribution of fuel alcohol production and consumption in China




Baolingbao to enlarge erythritol capacity to 4,000t/a

Baolingbao is planning to enlarge its erythritol capacity to 4,000t/a by mid 2010 from the current 1,000t/a. The expansion plan has been approvedbymajorstockholdersofBaolingbaoduringthecompany’sThirdExtraordinaryShareholders'GeneralMeetingfor2009on

Dec. 24th, 2009.

Thecompanyexpandsthecapacitymainlythroughtechnologyupgradeonitsoriginalproductionline.Atpresent,theprojectisundergoing

Environmental Impact Assessment . The construction is expected to begin in early 2010 and completed by mid 2010. After the launch of this project,BaolingbaowillbecomethesecondlargesterythritolproducerinChinawithtotalcapacityof4,000t/a(TABLE4),andexpectstoachievesalesrevenueofUSD17millionfromtheproject.TheerythritolproducedinthisplantwillbemainlyexportedtoJapan,SouthKorea,EU, etc.

TABLE 4: Main erythritol producers in China, 2009~2010

Company Capacity’ 09 Capacity’ 10Start time of

production

Zibo Zhongshi Green Biotech Co., Ltd. 4,500 4,500 2003

Shandong Baolingbao 1,000 4,000 2003

Binzhou Sanyuan Biotechnology Co., Ltd. 2,000 2,000 2008

Qingdao Langyatai (Group) Co., Ltd. 800 800 2007

Total 8,300 11,300 -


Baolingbao plans to totally invest USD12 million in thisproject. Itwillupgrade itsprevious production technology of erythritol, and additionally purchase 358 sets of advanced facilities such as fermenters and membrane filtration facilities. Meanwhile, 0.5 hectare will be newly expanded to build assorted workshops and supporting facilities.

Baolingbao will adopt self-developed technology of erythritol production in this project. In 2003, the companyused itsown erythritol production technology in its first 1,000t/a erythritol production line in Yucheng City, Shandong Province. It has upgraded this technology and has got the patent of the technology now.

Thriving demand for erythritol both

from home and abroad is the main driver for Baolingbao to expand its erythritol capacity. As one of the most popular low-energy sweeteners in the world, more and More people have become aware of its benefits to the body in recent years, thus boosting demand for erythritol year by year. Baolingbao has witnessed relatively good sales performance for its erythritol during 2006 ~ H1 2009 (FIGURE 11).

The expansion plan will greatly enhance the overall competitiveness for Baolingbao in the long term. Baolingbao targets to become the world’s leading functional sugar producer. Since late Aug. 2009 when Baolingbao got listed, it has publicly claimed its future threeprojects, includinganew10,000t/aoligofructose production line and 30,000t/a high-puritysolubledietaryfiberproduction

l i n e , a s w e l l a s expansion of current erythritol capacity to 4,000t/a.

However, Baolingbao m a y f a c e g r e a t

competition from new entrants of erythritol. A s i n v e s t i g a t i o n s h o w s , a n o t h e r t w o e n t e r p r i s e s h a v e b e g u n t o b u i l d e r y t h r i t o l plants s ince 2007. B i n z h o u S a n y u a n B i o t e c h n o l o g y Co. , Ltd. (Binzhou

Sanyuan) built up a 2,000t/a erythritol production line in late 2008 and Dezhou Fuyuan Biological Starch Co., Ltd. (Dezhou Fuyuan) claimed to build 5,000t/a erythritol

plant which is to be completed in May, 2010.

In China, only three erythritol producers have achieved capacity of over 1,000t/a, which is quite different from some overseas producers such as that from Japan, the US and EU with over 10,000t/a capacity for single producer. Large-scale production has enabled them to lower production cost. For Chinese producers, cutting down production cost will be the most effective way to boost

erythritol industry development in China. In addition, most Chinese people still know little about erythritol and its high price has resulted in small consumption.

Erythritol is used in many areas, including food industry, beverage industry, medicine industry and cosmetics industry, etc, in the US, EU and Japan currently. Food industry isthebiggestconsumptionfiled,accountingfor about 75% of the total erythritol consumptionintheworld.Applicationfieldsof erythritol is becoming wider and wider.

Baolingbao is one of the leading corn processing enterprises in China, with major production lines like 170,000t/ahigh fructose corn syrup (HFCS), 50,000t/a isomaltooligosaccharide and 1,000t/a erythritol currently. In 2010, Baolingbao is expecting to diversify its products structure by developing more functional sugars.

FIGURE 11: Erythritol output of Baolingbao, 2006~ H1 2009

843

525

991

231

84.30%

52.50%

99.10%

46.20%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

0

200

400

600

800

1,000

1,200

2006 2007 2008 H1 2009

(Un

it: t

on

ne)

Output Operating rate

Source: Baolingbao’ announcement



China Corn Oil gets listed in HK

China Corn Oil Co., Ltd. (China Corn Oil), Chinese leading edible corn oil producer with capacity of 182,000t/a in

2008, successfully got listed in Hong Kong on Dec. 18th, 2009,

and expects to raise about USD58~73 million for further development in the following three years.

It is the second time for China Corn Oil to go public in the market.ChinaCornOilhadbeenfirstlylistedinParis’Growth

Enterprises Market (GEM) on Mar. 25th, 2008, but soon withdrawn from it in H2 2008, mainly resulting from the announcement of zero export tax rebate for Chinese corn oil in Jul. 2008 (TABLE 5). The zero export tax rebate for Chinese corn oil caused sharp decrease of Chinese corn oil exports since Jul. 2008, and many domestic corn oil producers endeavored to increase their corn oil sales volume in domestic market to offset the loss of depressed export situation, such as China Corn Oil (TABLE 6) and Shandong Xiwang Foodstuff Co., Ltd. (Xiwang Foodstuff), etc.

Actually, domestic demand for corn oil has been increasing year by year in recent years. With awareness of corn oil’s benefitstohumanhealth,demandforcornoilwillcontinuouslysee uptrend in the near future. Particularly COFCO and Yihai Kerry Group Shanghai Plants (Yihai Kerry), both of whom

developed corn oil with over 10,000ppm phytosterol in 2009, are assiduously promoting corn oil in China, which attracts more consumers’ focus on corn oil.

China Corn Oil getting listed in Hongkong is mainly driven by bright prospect of corn oil industry in China. Actually, China Corn Oil has seen good performance in corn oil sales volume in

China in H1 2009, which is estimated to continuously increase in H2 2009. In H1 2009, China Corn Oil has sold 68,000

tonnes corn oil, accounting for 89% of the total capacity in H1 2008. At present, China Corn Oil has seized around 30% market share of total corn oil consumption in China, and is expecting to seize more market share in the future.

In the following three years, China Corn Oil will focus on raising corn oil market share in domestic market by carrying out such favorable measures as enlarging sales areas, increasing advertisements investment, expanding corn oil capacity, etc. All

thesemeasureswillefficientlyenhancethecompetitivenessofChina Corn Oil in China.

China Corn Oil is planning to enlarge corn oil sales areas

by further covering 80% second-tier cities in China in the following three years. Currently, China Corn Oil is selling corn oil mainly in first-tier cities in China, with seven field offices, fifty-fiveagenciesandthirty-threeretailstoresetc.

China Corn Oil will continue to raise reputation of its brand corn oil by varieties of promotions. Currently, China Corn Oil owns self-brand corn oil called “Longevity Flower” brand, and 15% of the total sales revenue of China Corn Oil is from product

retail and wholesale. And China Corn Oil expects its “Longevity Flower” branded corn oil to constitute 50% of total sales

revenue in the following three years.

China Corn Oil is now expanding its total edible corn oil capacity to 280,000t/a from current 182,000t/a. After investigation, China Corn Oil has been building 100,000t/

a edible corn oil production line currently, which may be launched in 2010~2011. After the launch, After the launch, China Corn Oil's leading position in Chinese corn oil market will be further consolidated.

Besides, China Corn Oil also will continuously develop new kinds of corn oil in the near future. In late 2009, China Corn Oil has successfully developed corn oil with 15,000ppm phytosterol, the third corn oil producer with high phytosterol in China, following COFCO and Yihai Kerry.

In China, there are two large-scale corn oil producers namely China Corn Oil and Xiwang Foodstuff, both with corn oil capacity of over 150,000t/a. Many insiders estimate that the listing of China Corn Oil in Hongkong will promote other key corn oil enterprises to get listed in the future, such as Xiwang Foodstuff, and will also boost the whole corn oil industry in China.

China Corn Oil, located in Zouping City, Shandong Province, has achieved edible corn oil output approximately 65,500 tonnes and 76,600 tonnes respectively in 2007 and 2008.

TABLE 5: Corn oil export tax rebate in China, 2004~2010

Period Export tax rebate

Jan. 2004~Sep. 200611.00%

Oct. 2006~Jul. 200713.00%

Aug. 2007~Jun. 20085.00%

Jul. 2008 till now0.00%

Source: China Customs & State Administration of Taxation

TABLE 6: Sales revenue structure of China Corn Oil, 2006~2009

Period Domestic Oversea

200650.00% 50.00%

200755.00% 45.00%

200870.00% 30.00%

H1 200998.80% 1.20%




Henan Agric. becomes Henan Lianhua’s biggest stockholder

Henan Agric. Synthesis Exploitation Co., Ltd. (Henan Agric.) purchased 5.08% stock of Henan Lianhua Monosodium

Glutamate Co., Ltd. (Henan Lianhua) from Henan Lotus Gourmet Powder Group Co., Ltd. (Lotus Group), original biggest stockholder of Henan Lianhua, in mid Dec. 2009, and became the biggest stockholder of Henan Lianhua (TABLE 7).

Henan Lianhua is one of the largest MSG producers in China with total output of 220,000 tonnes in 2009. Its ‘Lianhua’ branded MSG is well-known both at home and abroad.

Henan Agric. is a wholly state-owned investment institution in China, with main function of guaranteeing sustainable and healthy development of the leading agricultural enterprises in Henan. The stock purchase of Henan Agric. is actually supported by the government in order to accelerate development of Henan Lianhua in the future.

Henan Lianhua is domestic leading agricultural enterprise with 7,000staff.Thecompanyhaswitnessedlowprofitabilityinrecentyears, caused by fund shortage and debts disputes for its original biggest shareholder, namely Lotus Group. In fact, the 5.08% stock of Henan Lianhua was sold through auction. Owing to heavy debts caused by establishment of too manynewprojects,LotusGrouphascontinuouslysolditsstocksin recent years, thus leading to its controlling stocks of Henan Lianhua decreasing from 66.667% in 1998 to the current 5.59%.

Henan Lianhua’s production cost of monosodium glutamate (MSG) is higher than that of other MSG producers in China, like Meihua Biotechnology Group Co., Ltd. (Meihua Group) and Shandong Fufeng Group Co., Ltd. (Shandong Fufeng).

Currently, Henan Lianhua needs 200,000 tonnes glutamic acid (GA) annually to produce MSG while it can only produce 100,000 tonnes GA and thus has to outsource the remaining 100,000 tonnes. The increasing price of GA in recent years and the high dependence on raw material outsourcing have resulted in the higher MSG production cost for Henan Lianhua. For other big producers, like Meihua Group and Shandong Fufeng, they can produce GA to satisfy their own needs.

ItisexpectedthatagreatfundwillbeinjectedbyHenanAgric.to relieve Henan Lianhua’s plight and speed up its development, especially when the government is strengthening supervision of MSG industry. The government will eliminate more backward capacities in 2010, aiming to reduce environmental pollution. Therefore, domestic MSG capacity will continue to be concentrated in several large-scale MSG producers, which can benefitHenanLianhua’sdevelopment.

After Henan Agric. acquires Henan Lianhua, Henan Lianhua has drawn great attention from many inventors because of the Henan Agric.’s participation and large increase of MSG price in recent three months (Corn Products China News 0912, P6).

In 2010, as the biggest stockholder of Henan Lianhua, Henan Agric. is expected to purchase more stocks of Henan Lianhua in 2010. Meanwhile, it will avoid foreign-owned enterprises’ participation, as the government always shows great concerns for development of the national key industries.

Henan Agric. has promised that it will not change Henan Lianhua’s current key businesses, or sell related assets and reorganize with other enterprises during 2010.

TABLE 7: Stockholding situation of Henan Lianhua’s top three stockholders, 2009

Stockholder Before middle December After middle December

Henan Agric.6.82% 11.90%

Tianan Scie. & Tech. Co., Ltd.7.37% 7.37%

Lotus Group11.03% 5.59%

Source: Notice of Henan Lianhua



Nantong Jiuding obtains governmental funds for PLA expansion

Nantong Jiuding Biological Engineering Co., Ltd. (Nantong Jiuding) has successfully

obtained funds of USD1.4 million for its 20,000t/aPLAproject fromNationalDevelopmentandReform Commission on Dec. 24th, 2009, signifying that China is intensifying supports for PLA industry.

The capital received by Nantong Jiuding comes from the special fund for high-tech industrialization of bio-material engineering from the government. Early in late 2007, China has announced to support high-tech industrialization of bio-material engineering. In May, 2009, Nantong Jiuding’s 20,000t/aPLAproject,withinvestmentofUSD19million, was listed by the State as a demonstration project for high-tech industrialization of bio-material engineering. PLA produced in this new plant is mainly for export.

Nantong Jiuding’s breakthrough into PLA production technology is a key reason for the company receiving fund supports from the government.

Backward technology hampers PLA development in China, thus the government has been encouraging PLA production technology upgrade. At present, Nantong Jiuding’s self-developed PLA production technology has reached national-leading level and has been granted five national patents. With this technology, the company can produce high-quality PLA and has relieved requirements on purity of polymeric monomers, thus reducing needed time for polymerization and simplifying production process.

Meanwhile, this technology is suitable to be applied in PLA industrialization. As tested, quality of PLA adopting this technology has reached the same level as US-based NatureWorks LLC (the world’s largest PLA producer)’s similar products.

At present, Nantong Jiuding is accelerating constructionof its20,000t/aPLAprojectunderthe governmental fund supports, and expecting to completethisprojectinH22010.Actually,NantongJiudingstarted tobuild theproject in2007andinitiated a 1,000t/a pilot production line in 2008. Nantong Jiuding mainly produces varieties of grade PLAasinjectionmoldinggrade,blowngradeandfibre grade. Most of the company’s output will be exported to overseas countries like Japan.

Chinese PLA industry is expected to develop rapidly in 2010, as China is intensifying supports for PLA industry. PLA, as a kind of important biodegradable material which can substitute oil-based material, is now drawing increasing attention from the government and invertors, particularly at a time when China targets a low-carbon economy in 2010.

Bright future prospects of PLA have attracted many inventors to enter PLA industry in recent years. Besides Nantong Jiuding, it is reported that COFCO is joininghandswithChinaPetrolemChemicalCorporation to build a 5,000~10,000t/a PLA plant in Yushu County, Jilin Province currently, and expects to launch the plant in late 2010.

However, Chinese PLA industry still encounters some problems currently.

Firstly, despite of constant encouragement of PLA application, China hasn’t released detailed policies to promote PLA application in China. In many developed countries like Japan and EU, PLA applicationiscompulsoryinmanyfields,whileitisnot in China.

Secondly, high cost of PLA also impedes the industry development in China. Though PLA is one kind of biodegradable and environmentally friendly material, its price would be almost twice higher than that of oil-based similar materials when crude oil price is lower than USD80~90/barrel.

In China, there is only one PLA producer that has achieved the industrialization,namelyZhejiangHisun Group Co., Ltd. with total capacity of 5,000t/a. And currently, there are two producers engaged in the pilot production, namely Nantong Jiuding (1,000t/apilotproduction)andShanghaiTong-jie-liangBiomaterialsCO.,Ltd. (ShanghaiTong-jie-liang, 300t/a pilot production). Production scale of Chinese PLA industry largely differs from that of oversea countries where there are many PLA producers with capacity of over 10,000t/a. PLA application is common in Japan, the US and EU etc.

Nantong Jiuding, located in Rugao City, Jiangsu Province, and established and funded by Jiangsu Jiuding Group in 2005, is a high-tech enterprise engaged in R&D, production and marketing of PLA.



Pulled down by declined molasses-based edible alcohol price, corn-based

edible alcohol price has witnessed decrease since early Jan. 2010 (FIGURE 12).

In Shandong, average corn-based edible alcohol price was USD790~819/t on Jan. 15th, 2010, down 6% over that in last month. In late Dec. 2009, alcohol price has maintained uptrend attributed to thriving demand for edible alcohol in China.

It is the decrease of molasses-based edible alcohol that results in corn-based edible alcohol price decrease. Price of molasses-based edible alcohol, a rival product of corn-based edible alcohol, has been reducing to USD805~819/t in middle Jan. 2010, compared with USD862/t in late Dec. 2009.

Sufficient supply of molasses-based alcohol in the market is the main cause of alcohol price decrease. Now is the right crushingseason forsugarcane inmajorsugarcane planting areas such as Yunnan and Guangxi, thus molasses supply in the

market is quite ample.

With boosting demand for edible alcohol in Dec. 2009, many edible a lcohol producers have increased their operating rate since early this January, resulting in sharp increase of domestic edible alcohol supply. Although it is the peak season for

edible alcohol consumption currently, excessive supply has pulled down edible

alcohol price.

Molasses-based edible alcohol may continue its downtrend in the short run, due to continuously increasing supply of molasses-based alcohol in following two months.

However, corn-based edible alcohol won’t decrease on a large scale in the short run, thanks to increasing corn price in the

market.

In China, edible a lcohol i s mainly produced by corn, molasses and cassava, with corn as the main raw material in

North China and molasses and cassava in South China.

FIGURE 12: Prices of molasses-based and corn-based edible alcohol,

Dec. 2009 ~ Jan. 2010

760

780

800

820

840

860

880

3-Dec-09 13-Dec-09 23-Dec-09 2-Jan-10 12-Jan-10

(Un

it: U

SD

/t)

Molasses-based edible alcohol Corn-based edible alcohol


Chinese leading seed companies have started to enlarge investments in transgenic corn recently, as China has formally

approved the production and application safety certificate to phytase transgenic corn recently.

Chinese leading seed investors, especially those who have been dedicated to R&D of transgenic corn technology, are expected to benefit a lot as long as industrialization of transgenic corn is approved in China. Besides safety certificate, transgenic corn industrialization still needs certificates of seed production and

product management.

For instance, Origin Agritech Limited (Origin), as a technology-focused crop seed company, has increased its investment in developing transgenic corn technology. In Jan. 2008, Origin bought phytase transgenic corn technology from the Biotechnology Research Institute (BRI) of Chinese Academy of Agricultural Sciences (CAAS). In Aug. 2009, Origin’s phytase transgenic corn production was granted production and applicationsafetycertificatebyMinistryofAgricultureofChina,signifying that Origin will become the first phytase transgenic

Corn-based edible alcohol price decreases

Chinese seed companies eye transgenic corn

Competitiveness

Corn Supply



China in 2009 has exported very small quantities of corn compared with

previous years (FIGURE 13), mainly resulting from weak competitiveness in price and decreased corn supply in circulation after the government stored around 40 million tonnes corn during Oct. 2008 to Apr. 2009.

China totally exported 129,584 tonnes corn in 2009, down 50% over 2008 (FIGURE 14). Monthly export volume in Dec. was the biggest during 2009, reaching about 36,243 tonnes.

Corn export price in 2009 was ranging from USD232~255/t, which was lower than that in 2008 in general, mainly due to cancellation of corn export tariff since Dec. 1st, 2008.

In 2009, corn supply has exceeded its demand in China. To maintain balance between supply and demand, Chinese government tried to boost corn exports with policy supports. It set the 2009 corn export quota of 50 million tonnes and cancelled the 5% export tariff for corn and 10% tariff for cornstarch from Dec. 1st, 2008.

The government has endeavored to relieve the pressure from corn oversupply, but the effect was not good and corn export volume has kept at a low level in recent several years, much lower than the government’s

export quota, mainly due to following factors.

Firstly, the relatively high export price was the biggest obstacle for corn export. The FOB price of corn in Dalian port was ranging from USD232~255/t during 2009, while the CIF price of the US corn was around USD180/t in South Korea,

indicating great price advantage of the US corn. South Korea, Japan and other Asian countries are the main importers of Chinese corn (FIGURE 15).

Secondly , decreased corn supply in circulation in 2009 also affected corn exports. In order to push up corn price, Chinese government purchased 40 million

corn producer in China once China approves industrialization of transgenic corn in the future.

Transgenic corn is highly likely to become

thefirst transgenic crop to be industrialized in China in the following three~four years, forecasted by many industry experts. At present, China has approved a pilot industrialization project of feed-grade

phytase transgenic corn in Inner Mongolia.

Additionally, Yuan Long Ping High-Tech Agriculture Co., Ltd. (Longping High-Tech), one of China’s leading hybrid rice seed producers, has also increased its investment in corn business in early 2010. In order to enlarge its corn business, Longping High-Tech purchased 60% shares of one subsidy ofBeijingofShanxiTunyuSeedIndustry

Co., Ltd. (Shanxi Tunyu, one of the earliest and largest corn seed producers in China) with total investment of USD5 million this January. And it will continue to purchase shares of Shanxi Tunyu, aiming to be an controlling stockholder of Shanxi Tunyu in the near future.

Longping High-Tech has built a science and research center for R&D of transgenic technologies in Shanghai, which will s t r e n g t h e n L o n g p i n g H i g h - T e c h ’ s transgenic technology in the future.

Gansu Dunhuang Seed Co., Ltd., Shandong Denghai Seeds Co., Ltd., and Hefei Fengle Seed Co., Ltd., other leading corn seed

producers in China, have also been paying great attention to transgenic corn seed technology research.

Considering food safety of transgenic crops, China may give priority to industrialization for transgenic corn instead of that for transgenic rice, since corn is mainly consumed in feedstuff industry while rice by human beings. The safety dispute on transgenic crops industrialization will still

exist in China in the short run.

Origin, a leading agricultural company utilizing biotechnology and a top player in seed industry in China, specializes in R&D, production and distribution of agricultural crop seeds.

Longping High-Tech was established on June30th,1999andisChina’sfirsthybrid

rice producer.

FIGURE 13: Corn export price and volume in China, 2009

3,170

7,777

1,774

15,966

30,884

11,136 11,570

3,436 2,746

4,417

36,243

220

225

230

235

240

245

250

255

260

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

(Un

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/t)

(Un

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nn

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Volume Price


Note: No corn was exported in Jan. 2009.

Overview of Chinese corn exports in 2009



tonnes of corn from the peasants for storage during late 2008 to early 2009. After corn purchase of the government was finished in Apr., 2009, corn supply in circulation plummeted. Some feedstuff and corn-processing enterprises even have

difficultiestoobtaincornin2009.

In 2010, China will continue to set import and export quota. As reported, China is likely to reduce corn export quota in 2010, as the recovering feedstuff and corn processing industry in China will push up domestic corn demand. Moreover, total

corn output in 2009 is estimated to reduce, due to the drought that occurred in China’s key corn planting regions. Additionally, the government will continue the corn storage plan in 2010. Thus, corn oversupply may not occur again in 2010.

Actually, many insiders predict that Chinese corn export will be less and less in the coming few years due to its relatively high price. In recent years, Chinese corn export volume has maintained at a low level.

China does not always encourage corn exports , cons ider ing China ’s large population and possible grain crisis. Only when domestic corn supply exceeds demand would Chinese government encourage corn export of certain quantities with preferent ia l pol ic ies . And the government will only authorize some big stated-owned grain enterprises such as COFCO and Jilin Grain Group to export

corn.

In China, most corn is consumed in domestic market, with small quantities

exported. Total export volume in 2009 constituted 0.0831% of Chinese total corn output in 2008 (156 million tonnes). Over 90% of total domestic corn consumption

volume is used in feedstuff and corn processing industry.

In order to ensure grain safety in China, Chinese government has always paid attention to grain crops planting and has

intensified great supports. For instance, Bank of China has decided to raise the deposit reserve ratio by 0.5% from Jan. 18th, but agricultural industry can still enjoythepreviouslowerrate.

FIGURE 14: Corn export volume in China, 2005 ~2009

8,610,837

3,070,395

4,916,187

252,317 125,984 0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

2005 2006 2007 2008 2009

(Un

it: to

nn

e)


FIGURE 15: Export destinations of Chinese corn, Jan. ~ Nov. of 2008~2009

0

50

100

150

200

250

300

350

0

20,000

40,000

60,000

80,000

100,000

120,000

Other Asian countries

Taiwan Japan South Korea

(Un

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(Un

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Volume' 08 Volume'09 Price'08 Price'09


“Vita Sugar”, as a new and non-caloric sweetener, has formally been industrialized in China since late 2009.

Currently, Vita Sugar-containing food is being marketed in the US since it was approved by US Food and Drug Administration (FDA)

in 2009, suggesting a huge market potential of “Vita Sugar” for Chinese sweetener producers.

Since 2007, BioNeutra Inc., Jilin Modern Tianfeng Agriculture Co., Ltd., South China University of Technology with the patent

“Vita Sugar” formally launched in China

New Technology & New Products & R&D



of this technology, as well as local government in Lishu County, Jilin Province have totally invested over USD19 million to build “Vita Sugar” plant in Jilin and the plant was launched in Nov. 2009, which is the first plant to produce a new sugar of non-calorie but with sweetness in the world. Besides, the raw material used in this plant is potato.

Actually, Chinese plant mainly produces primary products of “Vita Sugar”, and all primary products will be exported to Canada and processed in to high-quality “Vita Sugar” food there, which will finally be consumed as high-end food in the US and EU.

The production technology of “Vita Sugar” was first invented by Professor Zhong Zhensheng from South China University of Technology in 2004, who is dedicated to relieve plump people’s fear of the intake of sugar-containing foods. The core technology has been granted six patents from the US, Canada and China during 2004~2009, two for each. Besides, with the support of Canadian government, Professor Zhong has successfully established test base of this technology in Canada in 2006.

The core technology of “Vita Sugar” is to control

distribution of sugar molecular weight by controlling dextrose equivalent during the reaction process. Because of using potato as raw material, it is easier to control distribution of molecular weight of starch sugar compared with that of corn, according to Professor Zhong. When starch molecular chain is cut short to a certain length, the starch will be converted into starch sugar without calorie but retaining sweetness, a reason for being named “Vita Sugar”.

However, production cost of “Vita Sugar” is higher than that of oligosacchride, such as isomaltooligosaccharide, according to Professor Zhong. For one thing, high accuracy of reaction conditions is crucial to “Vita Sugar” production. If any differentiation from the required conditions, it is hard to control the sugar molecular weight distribution. For another, special equipment with high expense is also needed.

Despite its high price and being sold solely in the EU and US, “Vita Sugar” is expected to become more popular among the public with heightening awareness of keeping fitandhealthyinChinainthefuture.

CCM International Limited

Address: 17th Floor, Huihua Commercial & Trade Building, No.80 Xianlie Zhong

Road Guangzhou, 510070, P.R.China

Tel: +86-20-37616606

Fax: +86-20-37616968

Email: [email protected]

Website: www.cnchemicals.com

Date post:	20-Mar-2016
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