The United States Board of Governors of the Federal Reserve System announced
interest rate increase, which depreciated RMB against USD. CCM believes that it will help expand
China's sucralose export to further
ease domestic overcapacity, but will cause trade friction also.
On 17 Dec., 2015 (Beijing time), the United States Board of Governors of the
Federal Reserve System (the Fed) announced the federal fund rate increased by
0.25% to a target interval of 0.25-0.5%. This marked the first time for the Fed
to increase the interest rate in recent ten years.
Correspondingly, the RMB was depreciated. According to statistics from the
China Foreign Exchange Trade System, the USD/RMB middle rate was 6.4814 on 18
Dec. (the uttermost in recent four and a half years), after RMB's deprecation
for a consecutive ten days.
About 80% of sucralose in China was for export. The settlement is mainly based
on USD and EUR. Such a surprising depreciation indicates that the domestic-made
sucralose's competitiveness is enhanced, which would increase the export and to
relief the oversupply of sucralose in China.
In 2015, China's sucralose market is facing overcapacity and export price
decline. According to CCM, the rate of capacity utilisation was about 45% in
January-November. Meanwhile, the average export price of China's sucralose decreased
from USD4,520/t in 2014 to USD3,713/t in 2015, with the decrease of nearly 19%.
"Under this circumstance, most of the sucralose companies suffered financial
loss. Due to the declining prices and high cost, many companies decided to suspend
the production of sucralose, some of which even tended to permanently quit the
industry,' stated by Wu Hulian, editor of Sweeteners China News.
Companies
Decided to Suspend Production or Quit the Industry
Yifan Xinfu Pharmaceutical Co., Ltd.: it
halted its 150 t/a production line in August 2014, with an intention to restart
when the market recovers. In 2015, however, the sucralose price continues
declining. In May 2015, it officially announced the suspension in production.
Hubei Yitai Pharmaceutical Co., Ltd.: it
suspended the production in May 2014, and quit the sucralose industry in May
2015.
In addition, some competitive sucralose companies intended to ease the
overcapacity by the means of expanding export. According to China Customs,
China exported about 2,130 tonnes of sucralose in the period of January-October,
up by 20% YoY. The top 3 are JK Sucralose Inc., Changzhou Niutang Chemical
Plant Co., Ltd. and Ji'an New Trend Technology Co., Ltd.. The exports of these three companies totaled 1,572
tonnes with the year-on-year growth of 16%, accounted for 74% of the national
figure.
What is noteworthy is that the outstanding up-and-coming Beijing VitaSweet Co.,
Ltd. made up 8% of the national exports druing the period of January-October in
2015 and ranked the top four in terms of the sucralose exporters.
"Actually, the merits and demerits from the depreciation of RMB against USD
co-exist,' said Wu.
Favorable
Balance of Trade May be Expanded
In general, the RMB depreciation will further highlight the advantage of low
price and thus to continuously expand the favorable balance of trade. This
situation may cause anti-dumping investigation or lawsuit.
In recent years, the export price of
sucralose from China has all the way been falling. If RMB continues
depreciating, the trade conflicts would arise and the loss of China's sucralose
exporters would be extremely huge.
However, "After RMB's list in the SDR (=Special Drawing Right) basket, the
People's Bank of China accepts certain RMB depreciation, but not sharp
depreciation, since they are worried about the excessive depreciation will
whittle the effect of RMB internationalization away'.
"What's more, China has already had big
trade surplus.' analyzed Ding Shuang, economist from Standard Chartered Bank, "Honestly,
RMB has no basis for long-term depreciation.'
Consequently, it is reasonable assume that the
continuous deprecation of RMB against USD will not be a "new normal'.
If you are looking for more information
about the sucralose industry in China, you could visit CCM's Online Platform.
About
CCM:
CCM is the leading market intelligence
provider for China's agriculture, chemicals, food & ingredients and life
science markets. Founded in 2001, CCM offers a range of data and content
solutions, from price and trade data to industry newsletters and customized
market research reports. Our clients include Monsanto, DuPont, Shell, Bayer,
and Syngenta.
We will attend FIC in the coming week. If you would like to meet us for consultancy in FIC, please get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.