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 high energy consumption and 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.
Table of Contents of Corn Products China News 1307:
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 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
China increases temporary reserve price of corn in 2013/2014
Chinese government has approved two GM corns import
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 even in the globe.
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