Vol.7 Issue 4 2014 - cnchemicals.com...On 18 March, 2014, Fufeng Group released its 2013 annual report, showing significant growth in gross profit, mainly due to a revenue growth in

Copyright © Guangzhou CCM Information Science & Technology Co., Ltd.

Corn Products China News

Vol.7 Issue 4 2014

Corn Products

CCM Newsletter Corn Products China News 1404

www.cnchemicals.com Copyright Guangzhou CCM Information Science & Technology Co., Ltd. E-mail: [email protected]

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Contents

Headlines ........................................................................................................................................ 2

Editor’s note .................................................................................................................................. 3

Supply and demand ..................................................................................................................... 4

China approves imports of Brazilian corn ..................................................................... 4

Import & export analysis ............................................................................................................ 5

Chinese corn products Imp. & Exp., Feb. 2014 ............................................................ 5

China's export volume of MSG increases in Jan.–Feb. 2014 ................................... 7

Ajinomoto to reduce I+G exports to China .................................................................. 10

Price update ................................................................................................................................. 11

Price update of corn products, April 2014 ................................................................... 11

Market prices of corn products as feed witness downtrend during Jan.-March

2014 ........................................................................................................................................ 12

Company dynamics ................................................................................................................... 15

Changshouhua Food performs well in 2013 ............................................................... 15

Fufeng Group's gross profit grows significantly in 2013 ........................................ 17

Global Bio-chem reports unsatisfactory performance in 2013 .............................. 21

Market dynamic .......................................................................................................................... 24

Domestic corn starch manufacturers increases their prices since mid-April

2014 ........................................................................................................................................ 24

Competitiveness ......................................................................................................................... 26

Increasing supply of sucrose to impact domestic starch sugar market ............. 26

Market price of wheat undergoes downtrend since Dec. 2013 .............................. 28

News in brief ................................................................................................................................ 29

North China Pharmaceutical acquires GeneTech and NCPC Aino ....................... 29

Longlive Bio-technology obtains two patents ............................................................ 29

Northeast Pharmaceutical achieves profit in Q1 2014 ............................................. 30

COFCO Biochemical to complete its plant relocation within 3-5 years ............... 30

China’s imports of DDGS increases in Jan.-Feb. 2014 ............................................ 30

Meihua Group is looking for new ways ........................................................................ 31

DSM intends to acquire Aland Nutraceutical .............................................................. 32

Guangji Pharmaceutical suffers net loss in Q1 2014 ................................................ 32

Subsidy for 1-generation fuel ethanol reduced .......................................................... 32

Star Lake Bioscience focuses on biochemical & pharmaceutical industry in

future ..................................................................................................................................... 32



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Headlines

On 8 April, 2014, AQSIQ announced that the qualified Brazilian corn was allowed to be imported to China since 31

March, 2014.

In Feb. 2014, the total import value and export value of corn products in China witnessed a sharp decline of

28% MoM and 35% MoM respectively.

According to data from China Customs, China’s MSG witnessed YoY increase in export volume in Jan.–Feb.

2014, while the export price decreased slightly.

It's reported that on 24 April, 2014, Ajinomoto will reduce I+G exports to China, which may be related to weak

price advantage and intense competition among domestic market.

Domestic market prices of corn products as feed witnessed a downtrend during Jan.-March 2014, which was

related to the flagging live pig and poultry market and low prices of soybean meal and corn.

On 25 March, 2014, Changshouhua Food released its annual report for 2013. The company performed well in

2013, and plans to grow profits by launching new products in 2014.

On 18 March, 2014, Fufeng Group released its 2013 annual report, showing significant growth in gross profit,

mainly due to a revenue growth in its leading product–xanthan gum. In 2014, the company will continue to

develop its leading products as well as focus on highly profitable products.

On 1 April, 2014, Global Bio-chem released its 2013 annual report, disclosing an unsatisfactory performance

for the year. Facing a depressed market, Global Bio-chem announced areduction in the production of lysine

and a temporary suspension in the production of polyol chemicals beginning in 31 March, 2014.

Ex-works price of corn starch in China rebounded since mid-April 2014, thanks to the increasing cost.

The increasing supply of sucrose in China may cause sucrose’s price declining in the next few months, which

may drag down the starch sugar's price in the future.

The domestic market price of wheat underwent an overall downtrend since Dec. 2013, mainly due to weak

demand from downstream industries and sufficient wheat supply.



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Editor’s note

In Q1 2014, due to the re recurrence of H7N9 and the overcapacity of live pig industry, the domestic market

prices of corn products as feed, including corn fiber, corn germ meal, corn gluten meal and distillers dried grains

with solubles (DDGS), and wheat (raw material of feed) underwent an downtrend. Furthermore, domestic price

of starch sugar also declined in Q1 2014, under the background of weak demand. It's estimated that the

domestic starch sugar market is still in the doldrums in the next few months, since a large number of imported

sucrose and increasing supply of domestic sucrose.

In April, 2014, the reduced corn surplus pushed up the market price of corn. Due to the increasing cost

pressure, the domestic starch sugar enterprises began to increase corn starch's price since mid-April 2014.

As for import & export, the total import value and export value of corn products in China witnessed a sharp

decline in Feb. 2014. While some of the corn products saw an increase in export volume, such as MSG. In

addition, China's corn witnessed YoY increase in import volume during Jan.-Feb. 2014, China increased corn

imports from Ukraine, Argentina, and Thailand, which will reduce its dependence on the US' corn.

It is worth noting that the General Administration of Quality Supervision, Inspection and Quarantine of the

People's Republic of China (AQSIQ) approved the imports of Brazilian corn at the beginning of April, 2014.

RMB Exchange Rate: USD1=RMB6.1503, USD1=HK7.757; source: The People's Bank of China. Notably, the

exchange rates in the table—Ex-works prices of corn products in China, April 2014 are different between in

March 2014 and April 2014.



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Supply and demand

China approves imports of Brazilian corn

On 8 April, 2014, the General Administration of Quality Supervision, Inspection and Quarantine of the People's

Republic of China (AQSIQ) issued an announcement that Brazilian corn passed the inspection and quarantine

by China and the corn which met the Requirements for Inspection and Quarantine on Imported Corn from Brazil

was allowed to be imported to China since 31 March, 2014. According to this requirement, the imported corn

from Brazil can be only used to process, instead of planting.

TABLE 1: Import origins of corn for China, 2013 and Jan.-Feb. 2014

2013 Jan.-Feb. 2014

Country Import volume,

tonne

Average import

price, USD/t Country

Import volume,

tonne

Average import

price, USD/t

The US 2,967,394 285 The US 847,620 277

Ukraine 108,949 240 Ukraine 192,944 257

Laos 81,829 324 Thailand 77,936 274

Argentina 66,020 290 Laos 8,481 327

Myanmar 26,105 280 Bulgaria 3,409 281

The Russian

Federation 4,952 208 Peru 126 2,085

India 4,076 311 Argentina 102 752

Thailand 3,100 285 Germany 0.5 3,009

Brazil 528 281 Total 1,130,618.5 274

Other 1,201 730 / / /

Total 3,264,154 285 / / /

Source: China Customs

Brazil is a main corn producer and exporter in the world and most of the corn it produces is GM corn. Data from

the US Department of Agriculture showed that Brazil exported 22 million tonnes of corn in 2012/2013 while the

US exported 18.6 million tonnes of corn in the same period. Meanwhile, the price of Brazil corn was a little

lower than the US'. According to data from China Customs, in 2013, the average export price of the US' corn to

China was USD285/t, whereas, the price of Brazilian corn was USD281/t.

Industry sources revealed that the qualifications acquired by Brazilian corn signals that China made a further

step toward diversification of corn import sources. Although the US is always the main import origin of corn for

China, its corn witnessed YoY decrease of 42% in import volume in 2013. On the contrary, China's corn imports

from Ukraine and Argentina have been increased in 2013. For example, China imported 192,944 tonnes of

Ukraine corn during Jan.-Feb.2014, 83,998 tonnes more than the total import volume of 2013.

This move will reduce Chinese dependence on the US' corn. It's reported that China has returned 1.45 million

tonnes of GM corn to the US because they contained the unapproved genetically modified ingredient MIR162

from Nov. 2013.



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Import & export analysis

Chinese corn products Imp. & Exp., Feb. 2014

In Feb. 2014, the total import value and export value of corn products in China witnessed a sharp decline of 28%

MoM and 35% MoM respectively.

TABLE 2: Imp. & Exp. value of corn products in China, Feb. 2014

Product Import

value, USD

MoM

change

Export value,

USD

MoM

change

Corn 130,113,983 -28% 0 -100%

Corn starch 20,615 -90% 1,624,142 -56%

Citric acid 300,259 -29% 48,912,913 -29%

Citrate 450,822 41% 10,042,137 -24%

Glucose and glucose syrup (fructose content ＜

20%, dry state) 51,256 -76% 15,315,691 -37%

Glucose and syrup (20%≤fructose content＜50%,

dry state) 59,976 114% 459,732 -12%

Other fructose and fructose syrup (fructose content

＞50%,dry state) 257,991 -53% 6,386,415 2%

Mannitol 55,890 132% 1,210,001 -38%

Xylitol 2,808 597% 3,817,446 -31%

Sorbitol 296,828 -4% 3,498,395 -28%

Furfural 1,953 -61% 959,416 -75%

Furfuryl alcohol and tetrahydrofurfuryl alcohol 143,129 -88% 7,744,896 -34%

Lysine 22,401 -93% 77,415 -2%

Lysine ester and salt 180,409 -58% 14,899,726 -43%

Glutamic acid (GA) 10,676 -12% 3,550,638 -37%

Sodium glutamate 37,330 1,056% 21,326,624 -46%

Inositol 14,256 102% 4,969,575 -22%

Total 132,020,582 -28% 144,795,162 -35%

Note: 1.From April issue, product names of Glucose and glucose syrup (fructose content <20%), Glucose and syrup

(50%> fructose content ≥20%) and Fructose and fructose syrup (fructose content >50%) change into "Glucose and

glucose syrup (fructose content <20%, dry state)", "Glucose and syrup (20%≤fructose content<50%, dry state)" and

"Other Fructose and fructose syrup (fructose content>50%, dry state)".

2.dry state- fructose content caculated by weight in dry state




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TABLE 3: Imp. & Exp. volume of corn products in China, Feb. 2014

Product Import volume,

tonne

MoM

change

Export volume,

tonne

MoM

change

Corn 479,756 -26% 0 -100%

Corn starch 11 -95% 3,188 -54%

Citric acid 75 -16% 55,116 -31%

Citrate 92 74% 9,612 -27%

Glucose and glucose syrup (fructose content

＜20%, dry state) 28 -79% 27,244 -39%

Glucose and syrup (20%≤fructose content＜

50%, dry state) 235 859% 302 -24%

Other fructose and fructose syrup (fructose

content ＞50%, dry state) 142 -58% 11,382 -3%

Mannitol 7 52% 476 -34%

Xylitol 0.52 1,044% 1,257 -30%

Sorbitol 268 22% 5,922 -26%

Furfural 0.29 -29% 649 -74%

Furfuryl alcohol and tetrahydrofurfuryl alcohol 16 -94% 4,631 -32%

Lysine 0.27 -99% 7 -16%

Lysine ester and salt 28 -92% 12,016 -43%

Glutamic acid (GA) 0.26 25% 2,825 -35%

Sodium glutamate 20 17,187% 17,667 -45%

Inositol 0.22 276% 275 -23%

Total 480,679.56 -26% 152,569 -35%




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TABLE 4: Imp. & Exp. price of corn products in China, Feb. 2014

Product Import price,

USD/t

MoM

change

Export price,

USD/t

MoM

change

Corn 271 -2% / /

Corn starch 1,960 115% 510 -3%

Citric acid 3,991 -16% 887 4%

Citrate 4,892 -19% 1,045 5%

Glucose and glucose syrup (fructose content ＜

20%, dry state) 1,818 15% 562 2%

Glucose and syrup (20%≤fructose content＜50%,

dry state) 255 -78% 1,523 16%

Other fructose and fructose syrup (fructose

content ＞50%, dry state) 1,817 12% 561 5%

Mannitol 7,806 53% 2,542 -7%

Xylitol 5,452 -39% 3,038 -1%

Sorbitol 1,109 -22% 591 -2%

Furfural 6,853 -46% 1,477 -1%

Furfuryl alcohol and tetrahydrofurfuryl alcohol 9,210 97% 1,672 -4%

Lysine 82,357 1,000% 10,483 18%

Lysine ester and salt 6,560 406% 1,240 -0.35%

Glutamic acid (GA) 40,904 -30% 1,257 -2%

Sodium glutamate 1,846 -93% 1,207 -1%

Inositol 64,216 -46% 18,053 1%


China's export volume of MSG increases in Jan.–Feb. 2014

During Jan.-Feb. 2014, China exported 54,126 tonnes of monosodium glutamate (MSG), with 16.3%

year-on-year growth rate. The main export destinations of China's MSG were Myanmar, Thailand, Vietnam,

Indonesia and the US. Among them, China's export volume of MSG to Thailand and Vietnam increased by 37.9%

and 76.0% year on year, respectively. And the average export price of MSG was about USD1,231/t in Jan.-Feb.

2014, USD33/t lower than that the same period in 2013.

The major producers of MSG in China are Fufeng Group Co., Ltd. (Fufeng Group), Meihua Holdings Group Co.,

Ltd. (Meihua Group), Henan Lotus Flower Gourmet Powder Co., Ltd. (Henan Lotus) and Shandong Linghua

MSG Incorporated Co. Ltd. (Shandong Linghua). During Jan.-Feb. 2014, thanks to the increasing demand from

overseas market, the export volume of MSG produced by Fufeng Group, Meihua Group, and Shandong

Linghua saw a year-on-year increase of 37.4%, 9.2% and 58.7% respectively. As for Fufeng Group, its MSG

was exported by a subsidiary-Baoji Fufeng Biotechnologies Co., Ltd. (Baoji Fufeng) in 2013; while its MSG was

mainly exported by Inner Mongolia Fufeng Bio-technological Co., Ltd. and Hulunbuir Northeast Fufeng

Biological Technology Co., Ltd. in 2014, since Baoji Fufeng has been in a relocation process during 2014-2016.

Similarly, the relocation of a Meihua Group's plant, sited in LangfangMeihua Biological Technology Co., Ltd.,



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will be completed in the future two years, and its MSG is exported by TongliaoMeihua Biotechnology Co., Ltd.

FIGURE 1: Export condition of China's MSG, Jan. 2013-Feb. 2014


TABLE 5: Export destinations of China's MSG, Jan.-Feb. of 2013, 2014

No.

Jan.-Feb. 2014 Jan.-Feb. 2013

Destination Volume, tonne Price,

USD/kg Destination Volume, tonne

Price,

USD/kg

1 Myanmar 8,008 1.21 Myanmar

7,413

1.17

2 Thailand 7,976 1.22 Thailand

5,782

1.24

3 Vietnam 5,614 1.21 The US

3,619

1.29

4 Indonesia 4,710 1.18 Indonesia

3,613

1.22

5 The US 4,373 1.21 India

3,340

1.20

6 India 3,119 1.18 Vietnam

3,189

1.27

7 Nigeria 1,766 1.36 Pakistan

1,943

1.22

Source: China Customs & CCM



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Another case is Henan Lotus, it only exported 115 tonnes of MSG to the US (The US is one of the main export

destinations of Henan Lotus's MSG.) in Jan.-Feb. 2014, a year-on-year decrease of 68.2%, leading to the YoY

decline of 20.2% in company's total export volume. The main reason was that the US Department of

Commerce (the USDC) announced that it would start anti-dumping and countervailing duty investigations on

MSG originating from China and Indonesia in Oct. 2013. (For more details, please refer to Corn Products China

News 1311: USDC's anti-dumping and countervailing duty investigations on MSG native to China and

Indonesia)

Instead, on 1 April, 2014, the USDC made an announcement that it terminated countervailing duty

investigations on MSG from China and Indonesia starting from 31 March, 2014; but the anti-dumping

investigation was still in progress.

TABLE6: Export condition of China's MSG by manufacturer, Jan.-Feb. of 2013, 2014

No.


Manufacturer Volume,

tonne

Price,

USD/kg Manufacturer

Volume,

tonne

Price,

USD/kg

1 Fufeng Group Co., Ltd.

24,816

1.22 Fufeng Group Co., Ltd.

18,057

1.23

2 Meihua Holdings Group

Co., Ltd.

15,720

1.19

Meihua Holdings Group

Co., Ltd. 14,398

1.31

3

Shandong Linghua

MSG Incorporated Co.,

Ltd.

4,470

1.19

Henan Lotus Flower

Gourmet Powder Co.,

Ltd.

3,295

1.32

4

Henan Lotus Flower

Gourmet Powder Co.,

Ltd.

2,629

1.30

Shandong Linghua

MSG Incorporated Co.,

Ltd.

2,817

1.21

5 Hongmei Group Co.,

Ltd.

1,464

1.58

Shandong Qilu

Monosodium Glutamate

Group Co., Ltd.

1,625

1.23

6

Shandong Qilu

Monosodium Glutamate

Group Co., Ltd.

1,124

1.25

Ningxia EPPEN Biotech

Co., Ltd.

1,618

1.18

7 Ningxia EPPEN Biotech

Co., Ltd.

1,050

1.28

Xinle Monosodium

Glutamate Foods Co.,

Ltd.

1,542

1.23




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TABLE 7: Export condition of China's MSG by exporter, Jan.-Feb. of 2013, 2014

No.


Exporter Volume,

tonne

Price,

USD/kg Exporter

Volume,

tonne

Price,

USD/kg

1 TongliaoMeihua

Biotechnology Co., Ltd.

13,703

1.18

LangfangMeihua

Biological Technology

Co., Ltd.

14,246

1.31

2 Inner Mongolia Fufeng

Bio-technological Co., Ltd.

9,868

1.23

Baoji Fufeng

Biotechnologies Co.,

Ltd.

10,020

1.23

3

HulunBuir Northeast Fufeng

Biological Technology Co.,

Ltd.

6,039

1.20

Inner Mongolia Fufeng

Bio-technological Co.,

Ltd.

2,915

1.27

4 Shandong Linghua MSG

Incorporated Co., Ltd.

4,317

1.19

Henan Lotus Flower

Gourmet Powder Co.,

Ltd.

2,825

1.32

5

Guangxi Nanning

Aopinglmp.&Exp.Trade Co.,

Ltd.

2,916

1.22

Shandong Linghua

MSG Incorporated

Co., Ltd.

2,159

1.22

6 Henan Lotus Flower Gourmet

Powder Co., Ltd.

2,123

1.30

LuxiJinli Trade Co.,

Ltd.

1,694

1.18

7 LangfangMeihua Biological

Technology Co., Ltd.

1,995

1.29

A.H.A Imp.& Exp. Co.,

Ltd.

1,441

1.17


Ajinomoto to reduce I+G exports to China

On 24 April, 2014, it's reported that Ajinomoto Co. Inc. (Ajinomoto) made a decision that it will reduce disodium

5'-ribonucleotide (I+G) exports to China and 1,000 tonnes I+G which are temporarily stored in the bonded area

are required to be sold as soon as possible. In fact, China's imports of I+G is about 2,000 tonnes per year,

accounting for above 13% of the total consumption in China.

The reduced export of Ajinomoto’s I+G to China was mainly attributed to two reasons:

For one thing, Ajinomoto had no price advantage in Chinese market, as high anti-dumping duty imposed the

Ministry of Commerce of the People's Republic of China (MOC) by and import tariff imposed by China Customs.

On 6 Sept., 2013, MOC decided that it would impose 9.9% anti-dumping duty on the imported nucleotide food

additive originated from Ajinomoto. (For more detail, please refer to Corn Products China News 1308: MOC

adjusts the dumping margins of the imported nucleotide food additives) For example, the market price of I+G

produced by Ajinomoto is USD243/t-USD325/t higher than that produced by domestic manufacturers in

mid-April 2014. For another, due to intense competition in the domestic I+G market, there may occur a price

war. The main I+G producers in the world are CJ Group Co., Ltd., Ajinomoto, Guangdong Zhaoqing Star Lake



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Bioscience Co., Inc. (Star Lake Bioscience), etc., indicating that market concentration was high. It's estimated

that the total capacity of I+G was 50,000 t/a in China in 2013, accounting for about 60% of the world total, while

the domestic demand for I+G was about 20,000 t/a, leading to serious overcapacity. In fact, the I+G

overcapacity condition started since 2010, manufacturers lowered the price continuously in order to capture

market shares. Meanwhile, the ex-works price of I+G was USD8,600/t-USD9,430/t (RMB53,000/t-RMB58,000/t)

in April 2014, but its production cost approximated USD11,300/t (RMB70,000/t). Industry sources revealed that

the domestic I+G manufacturers are in the state of loss at present. For example, gross profit margin of Star

Lake Bioscience's food additive division was -12.16% and -5.09% in 2012 and 2013, respectively.

I+G is mainly used as seasoning, often mixed with monosodium glutamate at a certain rate, and can greatly

enhance the flavor.

Price update

Price update of corn products, April 2014

TABLE 8: Ex-works prices of corn products in China, 15 April, 2014

Product 15 April, 2014 14 March, 2014

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

Corn starch (North China) 444 2,731 447 2,743

Corn starch (South China) 475 2,925 477 2,925

Furfural 1,242 7,650 1,413 8,670

Ethanol (Food grade) 890 5,482 893 5,478

75% maltose syrup 419 2,578 424 2,600

70% syrup sorbitol 508 3,125 538 3,300

Anhydrous citric acid 1,060 6,528 1,011 6,200

Monohydrate citric acid 918 5,650 913 5,600

Oxidized starch (Food grade) 625 3,850 655 4,017

Crystalline xylitol 4,060 25,000 4,075 25,000

HFCS (Fructose: 42%) 447 2,750 440 2,700

HFCS (Fructose: 55%) 528 3,250 513 3,150

Corn oil (First grade) 1,353 8,333 1,372 8,417

Maltodextrin 609 3,750 619 3,800

75% maltitol (Liquid) 642 3,950 644 3,950

Glucose monohydrate (Food grade) 520 3,200 530 3,250

Monosodium glutamate 1,153 7,100 1,161 7,125

Corn gluten meal 768 4,730 774 4,750

98.5% lysine 1,291 7,950 1,304 8,000

Distillers dried grain with solubles 349 2,150 342 2,100

99% threonine 1,770 10,900 1,826 11,200

Note: Ex-works price includes VAT.

Source: CCM



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FIGURE2: FOB of corn at Dalian Port, Jan. 2013-15 April, 2014

Source: CCM

Market prices of corn products as feed witness downtrend during Jan.-March 2014

The domestic market prices of corn products as feed, including corn fiber, corn germ meal, corn gluten meal

and distillers dried grains with solubles (DDGS), maintained a downtrend from Jan. 2014 to March 2014, which

was mainly affected by the flagging live pig and poultry market. Besides, low price of soybean meal and corn

also dragged down their prices.

In detail, data from CCM showed that the domestic market price of corn gluten meal (protein content: 60%)

declined sharply from USD893/t in Jan. 2014 to USD778/t in March 2014. And the domestic market prices of

corn fiber (spraying corn fiber) and corn germ meal were USD220/t and USD310/t in March 2014, down by

USD26/t and USD11/t respectively compared with Jan. 2014. Moreover, the market price of DDGS (high-fat)

produced in Shandong Province was USD355/t in March 2014, USD39/t lower than Jan. 2014.

The downtrend of domestic market prices of corn products as feed was attributed to several reasons.

Firstly, affected by the depressed live pig and poultry breeding industry, the domestic downstream feed

enterprises reduced the demand for corn feed products. On one hand, the domestic market price of live pig

decreased from USD2,403/t on 3 Jan., 2014 to USD1,755/t on 26 March, 2014. Even though the Ministry of

Commerce of the People's Republic of China launched a governmental purchase of 65,000 tonnes of frozen

pork for temporary reserve on 27 March, 2014, it has no direct effect on raising the price of live pig, which kept

falling to about USD1,723/t by 31 March, 2014. Due to the flagging live pig market, the majority of raisers have

low enthusiasm of increasing the number of live pig. According to data from the Ministry of Agriculture of the



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People's Republic of China, the number of live pig saw a year-on-year decrease of 1.1% in Feb. 2014, among

which the number of sow dropped by 3.5% YoY.

On the other hand, chicken products' sales performance was unsatisfactory in Q1. For example, on 29 March,

2014, Shandong Minhe Animal Husbandry Co., Ltd., one of the large chicken breeding enterprises in China,

released pre-announcement of Q1 2014, showing that it suffered net loss of USD8.1 million-USD9.8 million

(RMB50 million-RMB60 million) in Q1 2014, increasing by 28%-54% YoY. On 31 March, 2014, Fujian Sunner

Development Co., Ltd. released pre-announcement of Q1 2014 that it suffered net loss of

USD15.4million-USD20.3 million (RMB95 million-RMB125 million) during Jan.-March 2014, up by USD2.7

million-USD7.5 million (RMB16.4 million-RMB46.4 million) when compared with the same period of 2013.

Secondly, both of decreased prices of soybean meal (a substitute for corn feed products) and raw

material–corn dragged down the prices of corn products. According to CCM's investigation, the domestic

market price of 43% soybean meal was USD593/t in March 2014, USD50/t lower than of Jan. 2014.

Furthermore, the domestic market price of corn remained low from Jan. to March 2014, which stood at about

USD371/t.

FIGURE 3: Market prices of corn fiber (spraying corn fiber), corn germ meal and corn gluten meal (protein content

60%) in China, Jan. 2013-March 2014

Source: CCM



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FIGURE4: Market price of DDGS (high-fat) in Shandong Province, Jan. 2013-March 2014

Source: CCM

FIGURE5: Market price of corn in China, Jan. 2013-March 2014

Source: CCM



15

As it's difficult to improve the recessionary live pig and poultry market in a short term, it's estimated that the

domestic market prices of corn products as feed will still experience a slight decrease in April 2014. However,

May is the peak season of aquaculture, and the demand for aquatic feed will be on the increase at that time;

thus, the market prices of some of corn products as feed (such as corn germ meal and DDGS) will go up.

Company dynamics

Changshouhua Food performs well in 2013

On 25 March, 2014, Changshouhua Food Co., Ltd. (Changshouhua Food) released its annual report of 2013.

The report shows the company's revenue and net profit grew by 8.4% and 32.3%, respectively, from the

previous year. As for the company's development in 2014, Changshouhua Food will be launching a new

product, rice oil, as well as expanding sales channels, both of which measures are expected to further drive up

the company's performance.

TABLE 9: Changshouhua Food's performance, 2012-2013

Item 2013, million USD 2012, million USD YoY change

Revenue 476.4 439.7 8.4%

Cost of sales 379.4 352.3 7.7%

Gross profit 97.0 87.3 11.1%

Net profit attributable to shareholders 44.0 33.2 32.3%

Source: Changshouhua Food Co., Ltd

The rise in Changshouhua Food's revenue in 2013 was mainly due to a revenue growth in its leading product,

own-brand corn oil. In detail, the sales volume grew by 27.4%, and the revenue increased by 17.1% YoY.

Revenue from corn meal and other oil products (including sunflower oil, olive oil and cottonseed oil) in 2013

also saw a year-on-year growth of 38.2% and 30.2% respectively. As for corn meal, its average sales price

increased by 9.6% compared with 2012. And thanks to expanding sales channels, the sales volume of other oil

products consequently rose in 2013.

However, affected by falling soybean oil prices in 2013, the average sales prices of Changshouhua Food's

own-brand corn oil and non-brand corn oil decreased by 8.1% and 9.5% YoY, respectively. (Data from CCM

shows that the average market price of first-grade soybean oil fell to USD1,248/t in 2013, a shocking drop of

16.1% YoY).

Changshouhua Food's sharp rise in net profits was caused by several factors other than increases in revenue.

Firstly, non-operating income rose to around USD13.1million (RMB80.8 million) in 2013, up 49.1% from the

previous year. Most of this sum came from an insurance compensation for a fire that took place in the

company's factory on 9 Nov. 2012. Changshouhua Food collected the full reimbursement, of around USD4.3

million, in H1 2013.



16

Secondly, Shandong Sanxing Corn Industrial Technology Co., Ltd., a subsidiary of Changshouhua Food,

obtained a high-technology enterprise certification at the end of 2012; qualifying Changshouhua Food for a

preferential tax rate of 15% (China's statutory corporate income tax rate is 25%). The qualification is valid for

three years, beginning in 2013.

Changshouhua Food's corn oil products are mainly sold in the domestic market. And the revenue from corn oil

products in domestic market maintained an uptrend, which accounted for 100% of the total revenue from the

company's corn oil products in 2013, compared with the figure of 99.4% in 2012.

TABLE10: Changshouhua Food's performance by products, 2012-2013

Product

Revenue Gross profit Gross profit margin

2013,

million

USD

2012,

million

USD

YoY

change

2013,

million

USD

2012,

million

USD

YoY

change 2013 2012 YoY change

Own-brand

corn oil 300.6 256.8 17.1% 90.7 75.3 20.4% 30.2% 29.3%

0.9

percentage

point

Non-brand

corn oil 88.7 118.9 -25.4% 2.4 8.6 -72.3% 2.7% 7.2%

-4.5

percentage

points

Corn meal 66.8 48.4 38.2% -2.6 -2.2 18.3% -3.8% -4.5%

0.7

percentage

point

Other oil

products 20.3 15.6 30.2% 6.5 5.6 16.4% 32.1% 35.9%

-3.8

percentage

points

Source: Changshouhua Food Co., Ltd.

FIGURE6: Revenue structure of Changshouhua Food, 2012 and 2013




17

TABLE 11: Sales volume and average sales price of Changshouhua Food's corn oil, 2011-2013

Time Sales volume, tonnes Average sales price, USD/t

Own-brand corn oil Non-brand corn oil Own-brand corn oil Non-brand corn oil

2011 80,724 72,156 2,135 1,543

2012 118,734 82,048 2,163 1,450

2013 151,293 67,651 1,987 1,312


In 2014, Changshouhua Food will continue to enhance its brand image and awareness and expand its corn oil

sales channels. For example, in March 2014, the company signed a strategic partnership agreement with

Kangcheng Investment (China) Co., Ltd., the owner of RT-MART, a chain of over 300 supermarkets in China;

Changshouhua Food's own-brand corn oil will be on their shelves later this year.

Furthermore, Changshouhua Food will start production and sales of its new rice oil and health-care products in

June 2014. Rice oil's sales price is higher than corn oil's, and the product will be positioned in premium markets.

Industry sources estimate gross profit rates to exceed 40%. The launching of rice oil will be advantageous to

Changshouhua Food's future development, since it is not hindered by raw material shortages. While raw

materials for other edible oils, such as corn and soybean, are mostly dependent on imports, rice is widely and

consistently available, as China is one of the world's largest producers.

According to reports, in 2014 Changshouhua Food intends to build a refined corn oil production line with a

100,000 t/a capacity, and a packaging line also with 100,000 t/a capacity in a recently acquired plant in

Hangzhou, Zhejiang Province.Thecompany will also build a plant in Guangzhou in 2015. Once the Guangzhou

plant is operational, transportation costs to the southern market will decline substantially.

Fufeng Group's gross profit grows significantly in 2013

On 18 March, 2014, Fufeng Group Co., Ltd. (Fufeng Group) released its 2013 annual report. The report shows

the company's revenue grew by 2.3% year on year in 2013, achieving continuous growth in revenue for seven

years (since 2007) with a compound annual growth rate of 29.2%. Moreover, gross profits increased sharply in

2013, with 28.2% year-on-year growth rate, as the xanthan gum business became a key profit pillar of the

company.

TABLE 12: Fufeng Group's performance, 2012-2013


Revenue 1,848.2 1,806.7 2.3%

Cost of sales 1,506.8 1,540.5 -2.2%

Gross profit 341.4 266.2 28.2%

Net profit attributable to shareholders 82.3 69.4 18.7%

Gross profit margin 18.5% 14.7% 3.8 percentage points

Source: Fufeng Group Co., Ltd.



18

FIGURE 7: Fufeng Group's revenue, 2007-2013


In 2013, affected by a weak demand for xanthan gum and low import prices of guar gum (a substitute of

xanthan gum), the domestic xanthan gum market was in the doldrums. Even in this scenario, Fufeng Group's

xanthan gum witnessed YoY increase of 72.7% in gross profit in 2013. The growth was driven by a rise in both

sales volume and average sales prices, of 23.8% and 10.1% year-on-year growth rate respectively. Most of

Fufeng Group's xanthan gum are sold to overseas markets. In May 2013, the US Department of Commerce

imposed dumping margins ranging from 15.09% to 154.07% on Chinese xanthan gum, leading to a raise in

Fufeng Group's xanthan gum export prices. Furthermore, increasing demand for xanthan gum from the oil and

gas drilling industry helped Fufeng Group's xanthan gum exports reach USD213.3 million in 2013, up 42.4%

YoY. Fufeng Group produces food-grade and industrial-grade xanthan gum, and is one of the world's largest

producers.

In addition, Fufeng Group's high-end amino acids business, which includes valine, leucine, isoleucine and

glutamine, also performed well in 2013, selling approximately 2,406 tonnes and realizing revenue of 146.0%

year-on-year growth rate. High-end amino acid products, mainly used in health care products and

pharmaceuticals, are very profitable.

The average sales price of MSG decreased by USD136.4/t in 2013 when compared with 2012, resulting in a

revenue drop of 6.2%. Oversupply and intense competition led domestic manufacturers into a price war, and

Fufeng Group, of course, also lowered its prices. However, Fufeng Group has cost advantages due to

economies of scale, and MSG prices are relatively low, so that it can still attract clients; thus, the sales volume

of MSG increased by 6.3% from 2012. Export volumes also increased by 14.7% YoY.



19

FIGURE8: Sales volume and average sales price of Fufeng Group's xanthan gum, H1 2009-H2 2013


TABLE13: Fufeng Group's performance by division, 2012-2013

Item

2013, million USD 2012, million USD YoY change

MSG

division

Xanthan gum

division

MSG

division

Xanthan gum

division MSG division

Xanthan gum

division

Revenue 1,611.7 236.5 1,633.4 173.4 -1.3% 36.4%

Gross profit 203.5 137.9 186.4 79.8 9.2% 72.7%

Gross profit

margin 12.6% 58.3% 11.4% 46.0%

1.2 percentage

points

12.3 percentage

points


Threonine and lysine are relatively new products for the company, and as of March 2014 their total capacity is

about 40,000 t/a. They are used mainly as feed additives. Fufeng's sales prices were lower than other domestic

manufacturers', again due to the company's economies of scale.

In 2013, outputs of starch sweeteners, xanthan gum and high-end amino acids increased, as the second phase

of the Hulunbuir (Inner Mongolia) and Xinjiang plants began operations in Q2 2012 and Q4 2012, respectively.

Xanthan gum's capacity rose from 48,000t/a in 2012 to 74,000 t/a in 2013, while the production capacity for

high-end amino acids was expanded from 1,500 t/a at the end of 2012 to 4,000 t/a in 2013.

In 2013, Fufeng Group effectively controlled production costs, maintaining 2012 levels. An important factor in

this is Fufeng Group's ability to produce and use synthetic ammonia internally, thus reducing liquid ammonia

purchasing costs. The 2013 report shows a 60.7% YoY fall in liquid ammonia production costs. On the other

hand, Fufeng Group's plants in Xinjiang and Hulunbuir (Inner Mongolia) have easy access to cheap coal and

further strengthen the company's cost advantages.



20

TABLE14: Fufeng Group's revenue by product, 2012-2013

Product Revenue, million USD YoY change

2013 2012

MSG division

MSG 1,028.1 1,095.6 -6.2%

Corn refined products 262.9 253.9 3.6%

Fertilizer 123.9 145.2 -14.7%

Starch sweeteners 76.6 52.5 45.9%

Threonine and lysine 56.9 29.9 90.5%

High-end amino acids 34.4 14.0 146.0%

Glutamic acid 7.4 16.3 -54.5%

Corn oil 5.6 14.9 -62.1%

Compound condiment 1.3 0.9 46.9%

Others 14.7 10.3 42.5%

Xanthan gum division Xanthan gum 236.5 173.4 36.4%


FIGURE 9: Average quarterly sales price of Fufeng Group's MSG, Q1 2011-Q4 2013


In 2014, Fufeng Group will expand its MSG market share. Baoji Fufeng Biotechnologies Co., Ltd. (Baoji

Fufeng), a subsidiary of Fufeng Group, began to relocate since 2014, and the relocation will be fully completed

in 2016. Baoji's MSG capacity may decrease by 60,000 t/a per year during this phase, but the company will still

be able to maintain a capacity of around 1 million t/a in other factories and in parts of the Baoji factory before

relocation is completed. (For further details, please refer to Corn Products China News 1402: MSG plant of

Baoji Fufeng to be relocated).



21

TABLE15: Sales volumes and average sales prices of Fufeng Group's main products, 2012-2013

Product Sales volume, tonne Average sales price, USD/t

2013 2012 YoY change 2013 2012 YoY change

Fertilizer 1,080,928e 1,031,373e 4.8%e 114.6 140.8 -18.6%

MSG 1,002,566 943,148 6.3% 1,023.5 1,159.9 -11.8%

Starch sweeteners 157,843 100,858 56.5% 485.0 511.7 -5.2%

Xanthan gum 57,554 52,258 10.1% 4,106.1 3,315.6 23.8%

Threonine 36,613 18,299 100.1% 1,452.7e 1,632.0e -11.0%

Lysine (65% lysine) 5,677 0 / 651.1e / /

Note: "e" stands for "CCM's estimation"; revenue = (sales volume) * (average sales price).


In 2014, Fufeng Group will actively introduce new products with high profitability. The company is building a

production line for high-end amino acid products in its Xinjiang plant. Once the project is completed in H2 2014,

the plant's total amino-acid products capacity will reach 5,000 t/a. These products will enhance Fufeng Group's

product mix. In addition, the group plans to strengthen its market position by launching hyaluronic acid products.

To that end, a new production line is under construction at the Xinjiang plant and is expected to achieve a 50 t/a

capacity in 2014. Hyaluronic acid, a type of mucopolysaccharide, is widely used in health-care products and

cosmetics.

Global Bio-chem reports unsatisfactory performance in 2013

On 1 April, 2014, Global Bio-chem Technology Group Co., Ltd. (Global Bio-chem) released its 2013 annual

report. The document shows that the company suffered gross losses of about USD116.1 million in 2013, while it

had brought in gross profits of USD197.5 million in the previous year. Global Bio-chem expects little change in

a depressed market at least for the short term, and has therefore announced a reduction in the production of

lysine and a temporary suspension in the production of polyol chemicals beginning in 31 March, 2014.

TABLE 16: Global Bio-chem's performance, 2012-2013


Revenue 1,248.8 1,535.1 -18.7%

Cost of sales 1,364.9 1,337.6 2.0%

Gross profit -116.1 197.5 -158.8%

Net profit attributable to shareholders -783.9 -71.5 /

Source: Global Bio-chem Technology Group Co., Ltd.

The decline in Global Bio-chem's financial performance was attributed to the following reasons:

- A decline in sales volume and average sales prices of Global Bio-chem's products, particularly lysine. Affected

by the recent emergence of H7N9 and a growing supply, the average sales price and sales volume of lysine

decreased by 25% and 10% respectively in 2013, compared with 2012.



22

- The average cost of corn kernels was USD331.2/t in 2013, up by 5% year on year.

- The impairment loss registered by Global Bio-chem for its lysine and polyol chemicals inventory, due to a

decrease in sales prices. In 2013, average sales prices of lysine and polyol chemicals declined by 24.9% and

29.3% YoY, respectively.

- The impairment loss registered by Global Bio-chem for its production facilities was of USD438.3 million, in

view of the unfavorable market conditions.

Global Bio-chem has 3 divisions: amino acids, corn sweeteners and polyol chemicals.

The amino acids division includes lysine, protein lysine, threonine, glutamic acid, modified starches, among

others. In 2013, in the face of a depressed breeding industry, the sales volume of amino acid reached 588,829

tonnes, a year-on-year fall of 9.9%, causing a revenue decrease of 27.9% YoY for the division. Declining

average sales prices of amino acids further pushed down gross profits. Lysine, a main source of revenue for

the company, has a total capacity of about 800,000 t/a.

The corn sweeteners division includes sweeteners (glucose syrup, maltose syrup, high fructose corn syrup,

crystalline glucose and maltodextrin), and corn refined products (corn starch, corn gluten meal, corn oil and

others). This division is operated by an affiliated company, Global Sweeteners Holdings Limited (Global

Sweeteners). As international sucrose prices fell sharply in 2013, low import prices of the product greatly

impacted domestic prices. Due to an increasing domestic output of sucrose, some of Global Sweeteners' corn

sweeteners (substitutes for sucrose) witnessed YoY decline in sales volume and price. Even though Global

Sweeteners' high fructose corn syrup (HFCS) enjoyed a sharp increase in sales volume in 2013, the product's

diminished price led to a fall of 2.4 percentage points in its gross profit margin.

The polyol chemicals division includes ethylene glycol, propylene glycol, butylene glycol, resins, hydrogen,

liquid ammonia, among others. Since Q2 2013, polyol chemicals prices have suffered a dramatic decline, and

the products' gross loss rate reached about 246% in 2013. In view of this situation, Global Bio-chem decided to

temporarily suspend the production of polyol chemicals from June to Sept. 2013. As for liquid ammonia, a new

product for the company, it was mainly supplied to the amino acids division.

TABLE 17: Global Bio-chem's performance by division, 2012 and 2013

Division

Revenue Gross profit

2013, million

USD

2012, million

USD

YoY

change

2013, million

USD

2012, million

USD

YoY

change

Amino acids 726.3 1,006.8 -27.9% -52.1 154.7 -133.7%

Corn

sweeteners 541.4 582.7 -7.1% 17.8 45.2 -60.7%

Polyol

chemicals 128.4 166.0 -22.7% -81.7 6.4 -1,368.0%

Source: Global Bio-chem Technology Group Co., Ltd.



23

TABLE18: Global Sweeteners's performance by product, 2012 and 2013

Products

Revenue Gross profit Gross profit margin

2013,

millio

n

USD

2012,

millio

n

USD

YoY

chang

e

2013,

millio

n

USD

2012,

millio

n

USD

YoY

chang

e

2013 2012 YoY

change

Corn refined products 279.2 241.8 15.5% -2.7 6.3 -142.9

%

-1.0%

e

2.6%

e

-3.6

precentag

e points

Sweeteners

Maltose

syrup 92.2 106.6 -13.5% 4.4e 13.5e

-67.3%

e 4.8%

12.7

%

-7.9

percentag

e points

Maltodex

trin 72.8 72.8 0.0% 7.2 7.2 0.0% 10.0%

10.0

% 0.0

Glucose

syrup 56.2 112.2 -49.9% 4.7e 13.6e

-65.6%

e 8.3%

12.1

%

-3.8

percentag

e points

HFCS 29.5 16.4 78.9% 4.1 2.7 52.4% 14.0% 16.4

%

-2.4

percentag

e points

Crystallin

e glucose 11.5 32.9 -65.1% 0.3 1.9 -98.7% 0.2% 5.8%

-5.6

percentag

e points

Note: "e" stands for "CCM's estimation"; gross profit margin= (gross profit)/ (revenue).

Source: Global Sweeteners Holdings Limited

TABLE19: Sales volume and average sales price of Global Sweeteners's products, 2012 and 2013

Product Sales volume, tonne Average sales price, USD/t

2013 2012 YoY change 2013 2012 YoY change

Corn refined products Corn starch 350,000 270,000 29.6% 425.4 438.3 -2.9%

Others 315,000 294,000 7.1% 373.9 361.0 3.6%

Sweeteners

Maltose syrup 202,000 234,000 -13.7% N/A N/A 0.0%

Glucose syrup 158,000 302,000 -47.7% N/A N/A -3.9%

Maltodextrin 156,000 156,000 0.0% 464.1 464.1 0.0%

HFCS 59,500 31,800 87.1% N/A N/A -3.5%

Crystalline glucose 22,000 65,000 -66.2% N/A N/A 1.8%

Source: Global Sweeteners Holdings Limited

In 2013, Global Bio-chem exports reached USD325.8 million, accounting for 26.1% of the company's total

revenue. In 2013, a cooling in global markets reduced the company's income from overseas market by 16.1%

YoY. Global Bio-chem may also expect more difficulties in lysine exports: in March 2014, The Hague's District

Court issued a final judgment and found Global Bio-chem guilty of infringing Ajinomoto Co. Inc."EP" 710 patent.



24

(For more details, please refer to Corn Products China News 1311: Ajinomoto charges Global Bio-chem with

patent infringement agai.) This will impact the company's lysine sales in the Netherlands, the third largest

export destination of Chinese lysine ester and salt in 2013.

In order to improve operations, the company will implement a number of strategic plans.

First of all, Global Bio-chem will reduce production on some products. Taking into account a sluggish market

and a planned relocation of facilities that include a 200,000 t/a lysine production line, the company announced

a reduction in the production of lysine in 2014. And again due to a depressed market, the company also

temporarily suspended production of polyol chemicals beginning in 31 March, 2014.

In addition to that, Global Bio-chem will increase its amino acids product mix, launching high-added value

amino acids. An example is lysine with high protein, which will replace 98% lysine, threonine and arginine.

Market dynamic

Domestic corn starch manufacturers increases their prices since mid-April 2014

The domestic corn starch manufacturers raised this product's price since mid-April 2014, because of the

increasing cost of raw material. According to CCM's investigation, the ex-works price of corn starch in North

China increased from around USD441/t on 11 April, 2014 to around USD452/t on 21 April, 2014.

FIGURE 10: Ex-works price of corn starch in North China, Jan. 2013-21 April, 2014

Source: CCM



25

As CCM's data shown, the domestic market price of corn increased from USD370/t on 9 April, 2014 to

USD377/t on 21 April, 2014. A rise in corn price can be attributed to the following aspects:

For one thing, the reduced corn surplus pushed up the market price of corn. The National Development and

Reform Commission has been actively launching the governmental purchase of corn for temporary reserve

since Nov. 2013, leading to reduced corn surplus in the main production area of Northeast China and North

China. It's reported that the governmental purchase 66.7 million tonnes of corn for temporary reserve as of 15

April, 2014.

For another, the demand from downstream enterprises became strong. In detail, corn deep-processing

enterprises had strong desire to purchase corn in order to supplement inventory. And feed enterprises also

increased enthusiasm for the procurement of raw materials at the end of March 2014, as the rising demand

from domestic feed industry. It's estimated that the domestic feed industry will experience a MoM increase of

about 20% in sales volume, since its sales performance in April is better than March.

Despite a slight rise in the price of corn starch, domestic corn starch manufacturers still experienced losses

under the pressure of high cost. It's reported that corn starch manufacturers in Shandong suffered gross loss of

about RMB240/t on 18 April, 2014; while, it saw gross loss of about RMB210/t in 11 April, 2014.

Due to the increasing cost pressure, some of the corn starch manufacturers announced a reduction in the

production of the product or limited production so as to relieve itself pressures. Meanwhile, the operating rate of

corn starch industry maintained at about 43% on 18 April, 2014, down by 2% compared with 11 April, 2014.

It's worth noting that if the price of corn starch shows a sharp rebound in late April 2014, which may lead to

manufacturers improving operating rate and increasing supply, and then curb the upturn of corn starch market

again.

FIGURE11: Market price of corn in China, Jan. 2013-21 April, 2014

Source: CCM



26

Competitiveness

Increasing supply of sucrose to impact domestic starch sugar market

As reported by China Sugar Association, in the extraction season of (from October of this year to September of

the next year, the same hereinafter) 2013/2014, domestic sucrose output was 12.2 million tonnes by the end of

March 2014, up by 3.2% year on year. According to data from China Customs, China imported 287,855 tonnes

of sucrose in Q1 2014, with a YoY growth of 63.3%. The increasing supply of sucrose is likely to impact flagging

starch sugar (a substitute for sucrose) market.

Since there exists a significant price difference between China's sucrose and international's at present,

domestic manufacturers have a high enthusiasm for sucrose imports. In fact, most of import sucrose is raw

sugar, and most raw sugar processing enterprises in China use the cheap imported raw sugar as raw material.

As revealed by the National Development and Reform Commission, the average cost of finished sugar

produced by imported raw sugar was USD645.5/t (RMB3,970/t) in March 2014, USD119.5/t (RMB735/t) lower

than the market price of sucrose in Guangdong.

A large number of imported sucrose and increasing supply of domestic sucrose resulted in a drop in the

domestic price of sucrose. Data from CCM showed that domestic market price of sucrose declined from

USD808/t in Jan. 2014 to USD774/t in March 2014. Under this situation, domestic sucrose enterprises suffered

losses. For example, on 15 April, 2014, Guangxi Guitang (Group) Co., Ltd. issued its pre-announcement of

annual performance of Q1 2014, showing that the company suffered net loss of around USD0.7 million-USD1.1

million (RMB4.5 million-RMB6.7 million). And its machine-processed sugar witnessed YoY fall of 6.45% in sales

volume, as well as a drop of 14.8% in average sales price.

FIGURE 12: Imports of sucrose in China, Jan. 2013-March 2014




27

Low sugar price will affect the domestic starch sugar's price to some extent. According to CCM's investigation,

the ex-works price of High fructose corn syrup ( F55) declined from USD525/t in Jan. 2014 to USD488/t in

March 2014.

In the next few months, with a slight increase in corn starch's price and downstream industries (such as cold

drinks, juice beverages, and dairy products) entering into peak consumption season, the price of starch sugar

will increase slightly.

However, industry sources thought that it is not so optimistic that the domestic prices of starch sugar keep an

uptrend this year, as increasing yield of sucrose in the extraction season of 2013/2014 and ineffective control in

sucrose imports.

Yang Yunsheng, secretary-general of Yunnan Sugar Association, stated that the import trend of sucrose

depends on international sucrose price trend and whether China limits imports through policies, in the next few

months. If the low imported sucrose brings the profit to the domestic enterprises, sugar imports will be further

expanded.

Moreover, the newly-increased capacity of starch sugar also aggravates the overcapacity condition. For

instance, a 10,000 t/a crystalline fructose joint constructed by Guangdong Province Huahai Sugar Industry

Development Co., Ltd. and Guangdong Yongqing Biotechnology Co., Ltd. will be put into operation at the end of

April 2014. The capacity of crystalline fructose and high fructose corn syrup will reach 10,000t/a and 35,000 t/a

respectively once the project will be completed.

It's reported that domestic starch sugar capacity reached 17 million t/a in 2013, while its output was just about

10 million tonnes.

FIGURE13: Market price of sucrose in China, Jan. 2013-March 2014

Source: CCM



28

Market price of wheat undergoes downtrend since Dec. 2013

According to CCM's investigation, the domestic market price of wheat decreased from around USD425/t in Dec.

2013 to around USD410/t on 17 April, 2014.

FIGURE 14: Market price of wheat in China, Jan. 2013-17 April, 2014

Source: CCM

The reasons for the decliningwheat price during Jan. 2014-April 2014 are as follows:

Firstly, the weak demand for wheat from flour and feed industries. Generally speaking, stimulated by the New

Year's Day and the Spring Festival, the demand for flour is strong at the beginning of the year. But in Jan. 2014,

domestic flour market was in a doldrums overall. And domestic flour market has entered a seasonal off-season

in April 2014, so that demand for wheat from flour industry is weak. As a result, most flour manufacturers

maintained a low operating rate. It was reported that the average operating rate of flour manufacturers in the

main flour producing areas was 38% in mid-April 2014, compared with the figure of around 46% in mid-March

2014.

It's worth noting that, in order to avoid suffering loss, domestic flour manufacturers had strong desire to

purchase cheap wheat. Because of the overcapacity of flour and intense competition in flour market, the

deomestic market price of flour remained low. Along with the decreasing market price of wheat bran (a

by-product of flour), some flour manufacturers even faced the loss plight.

Meanwhile, gloomy live pig and poultry industry in China dragged down demand for feed, consequently,

domestic feed manufacturers lost their enthusiam to for purchasing wheat.



29

Secondly, the supply of wheat was sufficient. Domestic traders and grain enterprises positively sold their wheat

in this period, because they were not optimistic about the wheat market in the near future. Besides, the state

grain depots were also busy with the rotation of central grain reserves.

It is estimated that the domestic market price of wheat may maintain a downtrend in the next months, because

demand for wheat from flour industry may still be weak as the flour industry will enter into the consumption

off-season in Q2 2014.

News in brief

North China Pharmaceutical acquires GeneTech and NCPC Aino

On 20 March, 2014, North China Pharmaceutical Co., Ltd. (North China Pharmaceutical) made an

announcement that it has signed a share transfer agreement with Maui Bio-technology Development Company

Limited (Maui Bio-technology) and Maui (BVI) Investment Limited (Maui Investment). According to the

agreement, North China Pharmaceutical will acquire 25% stake of NCPC GeneTech Biotechnology

Development Co., Ltd. (GeneTech) with about USD9.0 million (RMB55.2 million), which was held by Maui

Bio-technology; and will acquire 49% stake of North China Pharmaceutical Group Aino Co., Ltd. (NCPC Aino)

with about USD10.0 million (RMB61.8 million), which was held by Maui Investment. After acquisition,

GeneTech will become a wholly-owned subsidiary of North China Pharmaceutical, which is conducive to profit

growth of North China Pharmaceutical's biopharmaceutical business. Moreover, the acquisition of NCPC Aino

is beneficial for the development of North China Pharmaceutical's biopesticide business.

North China Pharmaceutical is one of the main manufacturers of vitamin C(VC) active pharmaceutical

ingredient.

Longlive Bio-technology obtains two patents

On 24 March, 2014, Shandong Longlive Bio-technology Co., Ltd. (Longlive Bio-technology) made an

announcement that the company has obtained a patent certificate granted by the State Intellectual Property

Office of the People's Republic of China (SIPO). The patent titled “Nutrient Protein Powder with High Digestive

Absorption Function" has a 20-year validity period beginning 12 Dec., 2012. The patent number is "ZL

201210532781.X". This patent may help the company launch protein powder products.

According to the patent, this protein powder contains protease, functional oligosaccharide, and sugar alcohol,

in addition to protein powder. Among them, the protease plays an important role in digestion of the protein and

functional oligosaccharide promotes the human intestinal micro-ecologic health.

On 1 April, 2014, Longlive Bio-technology obtained another patent named "A Preparation Method of High-purity

Resistant Starch", which has a 20-year validity period beginning 11 Nov., 2011. The patent number is "ZL

201110358243.9". According to the invention, the purity of the resistant starch provided by this preparation

method is higher than 80%, with good mouthfeel and stability. The production technology is simple and the



30

operability is high, thus, batch production can be carried out. Probably, this patent will help the company

develop health-care products containing resistant starch in the future.

Northeast Pharmaceutical achieves profit in Q1 2014

On 28 March, 2014, Northeast Pharmaceutical Group Co., Ltd. (Northeast Pharmaceutical), one of the main

producers of vitamin C (VC) in China, released its pre-announcement of performance of Q1 2014, showing that

the company achieved net profit of USD8.1 million-USD11.4 million (RMB50 million-RMB70 million) in Q1 2014,

whereas, it suffered net loss of USD4.2 million (RMB26.8 million) in Q1 2013. Northeast Pharmaceutical

received compensation of RMB115.07 million, as it has disposed of fixed assets in Shenyang City, Liaoning

Province.

COFCO Biochemical to complete its plant relocation within 3-5 years

On 28 March, 2014, COFCO Biochemical (Anhui) Co., Ltd. (COFCO Biochemical) made an announcement that

it will complete its plant relocation within 3-5 years, according to Bengbu government's requirement that the

main bio-chemical manufacturers should relocate into industrial park.COFCO Biochemical owns citric acid

plant, amino acid plant and fuel ethanol plant in Bengbu City, Anhui Province.

China’s imports of DDGS increases in Jan.-Feb. 2014

According to data from China Customs, China's import volume of distillers dried grains with solubles (DDGS)

reached 954,613 tonnes during Jan.-Feb. 2014, a shocking year-on-year increase of 432%. China's imports of

DDGS mainly came from the US with amount of 954,485 tonnes, and it imported 128 tonnes of DDGS from

France in this period. Whereas, during Jan.-Feb. 2013, China only imported 178,761 tonnes and 516 tonnes of

DDGS from the US and Canada, respectively.

FIGURE 15: Import trend of DDGS in China, Jan. 2013-Feb. 2014




31

The average import price of DDGS was about USD321/t during Jan,-Feb. 2014, USD20/t-USD40/t lower than

the same period of 2013. The import price of DDGS began to decline from Dec. 2013, which may be due to

China returning DDGS to the US because they contained the unapproved genetically modified ingredient

MIR162.

Meihua Group is looking for new ways

In 2014, Meihua Holdings Group Co., Ltd. (Meihua Group) will focus on the pharmaceutical industry, as the

domestic MSG and amino acid markets were in the doldrums in the past two years.

The gross profit margins for both MSG & glutamic acid division and amino acid division have kept falling since

2011. Due to the diminished gross profit margins of the main business, Meihua Group released an

announcement on 25 March, 2014 that it will terminate the construction of its 300,000 t/a compound fertilizer

project in Xinjiang plant, and the remaining investment will be injected in other projects. The compound fertilizer

project (including a production line of glutamic acid) was invested by Meihua Group in Aug. 2012, scheduled for

completion within two years.

FIGURE 16: Gross profit margins of Meihua Group's MSG & glutamic acid division and amino acids division,

2011-2013

Source: Meihua Holdings Group Co., Ltd.

Instead, Meihua Group will focus on new fields, such as pharmaceuticals and environmental protection. On 25

March, 2014, Meihua Group announced that it will acquire Shanxi Guangsheng Pharmaceutical Packaging Co.,

Ltd. to expand capsule business and develop pullulan, as pullulan is a kind of ideal raw material for producing

capsule. (For more details, please refer to Corn Products China News 1301: Meihua Group plans to produce

pullulan) It's reported that its pullulan project was in the phase of trial production in H2 2013, with a capacity of

40 t/a. It's estimated that the company's pullulan capacity will reach 400 t/a-500 t/a at the end of 2014.



32

Meanwhile, the capacity of pullulan-based capsule will reach 400 million grains at the end of 2014 as

estimated.

In fact, on 3 Jan., 2014, Meihua Group revealed that it will acquire Dalian Hiss Bio-pharm Co., Ltd. so as to

develop biological vaccines. On 8 March, 2014, the company also said that a wholly-owned subsidiary of

it–Meihua Biological Investment Holdings Co., Ltd.–would involve in environmental protection business. (For

more details, please refer to Corn Products China News 1403: Meihua Group's revenue increases while its net

profit decreases in 2013)

DSM intends to acquire Aland Nutraceutical

On 9 April, 2014, DSM N.V. (DSM), the global Life Sciences and Materials Sciences company, announced on

website that it made exclusive discussions with Aland (Jiangsu) Nutraceutical Co., Ltd. (Aland Nutraceutical),

which may lead to the acquisition of Aland Nutraceutical. Once successful acquisition, it will further strengthen

DSM's position in vitamin C segment, as well as increasing DSM's existing vitamin C capacity.

Aland Nutraceutical is a one of the top 5 producers of vitamin C in China, whose capacity reached about 20,000

t/a. It's reported that the company realized net sales of about USD90 million in vitamin C in 2013.

Guangji Pharmaceutical suffers net loss in Q1 2014

On 15 April, 2014, Hubei Guangji Pharmaceutical Co., Ltd. (Guangji Pharmaceutical) released its

pre-announcement of performance of Q1 2014, disclosing losses in its performance. In detail, the company

suffered net loss of USD0.8 million-USD1.3 million (RMB5 million-RMB8 million) in Q1 2014, while it underwent

net loss of USD1.5 million (RMB8.9 million) during the same period of 2013.

The net loss of Guangji Pharmaceutical in Q1 2014 was attributed to the following reasons. On one hand,

demand for leading products (including vitamin B2) was weakened from domestic and overseas markets and

the sales price of leading products remained low. On other hand, the cost of raw materials and the price of

energy were high.

Subsidy for 1-generation fuel ethanol reduced

On 15 April, 2014, COFCO Biochemical (Anhui) Co., Ltd. (COFCO Biochemical) made an announcement that

the subsidy for the company's 1-generation fuel ethanol (take corn as raw material) granted by the Ministry of

Finance of the People's Republic of China was USD48.8/t (RMB300/t) in 2013, down by USD32.5/t (RMB200/t)

compared with 2012.

Star Lake Bioscience focuses on biochemical & pharmaceutical industry in future

Under the background of the company's unsatisfactory performance, Guangdong Zhaoqing Star Lake

Bioscience Co., Inc. (Star Lake Bioscience) has conducted industrial restructure in recent two years, focusing



33

on biochemical & pharmaceutical industry.

On 17 April, 2014, Star Lake Bioscience released financial report of Q1 2014, showing that it suffered net loss

of USD9.33 million (RMB57.36 million). In fact, the company experienced net loss of USD32.98 million

(RMB202.85 million) in 2012. And it underwent net loss of USD6.62 million (RMB40.72 million) during Q1-Q3

2013; however, it got large amount of non-operating income in Q4 2013, resulting in achieving net profit of

USD3.29 million (RMB20.24 million) in the whole year of 2013.

In 2013, the gross profit rates of food additive business and feed additive business were -5.09% and -8.52%

respectively; whereas bio-chemical pharmaceuticals business reached 25.44%.

In order to improve operations, Star Lake Bioscience eliminated the unprofitable business and explore new

businesses. Among them, on 24 Sept., 2013, Star Lake Bioscience announced to set up a Pharmaceutical

Development Center and Guangdong Yuebao Bio-pharmaceutical Co., Ltd. for accelerating the bio-chemical

pharmaceuticals development of the company. On Feb. 2014, the company decided to transfer a 100,000 t/a

high fructose corn syrup project to Cargill Investment (China) Co., Ltd.

Journalist: Shuixiu Feng Editor: Ally BiChief Editor: Xuejian ShiPublisher: Guangzhou CCM Information Science & Technology

Co., Ltd.

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