On 27 Sept. 2012, Shandong Longlive Bio-technology Co., Ltd. (Shandong Longlive), a corn further processing enterprise in China, revealed that the company has decided to terminate the investment in its crystalline maltitol project with the capacity of 5,000t/a, and will transfer the funds of about USD12 million, which was raised for the crystalline maltitol project, to invest in the enzymatic hydrolysis lignin project with the capacity of 4,000t/a. It is suggested that the company may pay less attention to its starch sugar business in the future, according to CCM’s November issue of Sweeteners China News.
Actually, Shandong Longlive considered that the market environment of crystalline maltitol had witnessed many negative changes since last year, and its crystalline maltitol project would face operational risks in the future. Chinese government has paid more and more attention to strengthening the supervision over corn further processing industries, including the starch sugar industry. New kinds of sugar substitutes, especially functional sugar products, have emerged one after another, which brings more competition to the starch sugar industry.
Meanwhile, the increasing price of corn, one main raw material for crystalline maltitol, also drove the company to decide to give up the project. Domestic average market price of corn was up by about 40% to USD381/t in the first eight months of 2012 from USD273/t in the same period of 2010. At the same time, the domestic average ex-factory price of crystalline maltitol was only up by about 2% to USD2,870/t in Jan. - Aug. of 2012 from USD2,820/t in the same period of 2010. Based on the higher growth rate of market price of corn over the ex-factory price of crystalline maltitol, it can be suggested that the gross profit margin of crystalline maltitol has decreased sharply in the past two years, and it may continue to decrease in the future.
Compared with the crystalline maltitol project, the enzymatic hydrolysis lignin project of Shandong Longlive has a good prospect. Firstly, the company's project uses corn cob residue (after production of functional sugar) as raw material, which is in accordance with the Catalogue for Guiding Industrial Restructuring (2011) as it encourages the reapplication in fields and comprehensive utilization of straws and stalks of crops, and will enjoy some benefit from Chinese government. Secondly, because of using the residue as raw material, the company can easily extract lignin products and effectively reduce operating cost, which could bring more profit than the crystalline maltitol project to the company. Meanwhile, domestic petrochemical industry needs huge amounts of lignin, but the number of domestic lignin producers (including enzymatic hydrolysis lignin and non-enzymatic hydrolysis lignin) is quite small, which means Shandong Longlive may face little competition.
It is predicted that the investment change may benefit the company from concentrating its efforts on functional sugar business in the future. On one hand, the investment change reflects that Shandong Longlive is not optimistic about the prospect of domestic starch sugar market. In H1 2012, the poor performance of corn starch and starch sugar businesses has resulted in the company's loss (Please refer to Sweeteners China News Vol.2 October Issue, p10, Shangdong Longlive performs bad in H1 but may do well in H2 2012). It is believed that the investment change is the first step for the company to reduce its investment in starch sugar business, and the company may pay more attention to its other businesses, including its functional sugar business. On the other hand, the raw material of lignin is from the residue after the production of functional sugar. Thus, after the completion of the enzymatic hydrolysis lignin project, the good performance of the company's functional sugar business can also ensure the stable raw material supply for its lignin project, while the poor performance of functional sugar business may bring more loss to the company than now. To conclude, it is believed that the company is willing to promote the smooth development of its functional sugar business in the future.
Source: Sweeteners China News 1211
http://www.cnchemicals.com/Newsletter/NewsletterDetail_190.html
Content of Sweeteners China News 1211:
Layn revises performance in the first three quarters of 2012
Starch Sugar and Polyol Branch of CBFIA Key Enterprises Work Meeting held National Maltitol Research and Testing Technical Center established
Xiwang Sugar's gross margin decreases in Q3 2012
Shandong Longlive: functional sugar & cellulosic ethanol approved products with origin protection
Chinese output of soft beverages reaches 97.8 million tonnes in Jan.–Sept. 2012
Domestic FOS industry: opportunities and challenges co-exist
Domestic IMO market develops at slow speed over last two years
Domestic mogroside mainly sold abroad
HFCS to develop well driven by domestic beverage industry
Trehalose to enjoy good prospect in China
Shandong Longlive terminates investment in crystalline maltitol project
Wanfu Biotechnology commits financial fraud in H1 2012 report
Baolingbao to perform well in 2013
Growth rate of net profit of QHT decreases sharply in Q3 2012
Price of starch sugar to meet small fluctuation with harvest of new corn
Ex-factory prices of Chinese sweeteners in Oct. 2012
China's import tariff quotas of sucrose remains 1.945 million tonnes in 2013
Chinese manufacturers may begin to stabilize export price of sucralose
Export overview of some sweeteners and raw materials in China, Sept. 2012
… …
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Sweeteners China News is a monthly newsletter published by CCM International Limited. Based on China market, CCM offers timely update and close follow up of China’s various kind of sweeteners market dynamics, analyze the market data and trends, Major columns include market dynamic, company dynamic, raw material supply, price update, import & export analysis, Consumption Trend & Competitiveness.
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