Export
rebates rate for corn starch and alcohol has been re-adjusted back to 13% since
Sept. 1 2016 in China.
However, the adjustment on export rebates will not save the corn starch market
in China,
according to analyst CCM.
Source: Baidu
In
Aug. 19, China's Ministry of Finance (MOF) and China's State Administration of
Taxation (SAT) jointly released the
Notice on Re-adjustment on Export Rebates Rate of Corn Deep-processed Products (the Notice). According to the notice, since Sept. 1 2016, the export rebates
rate for corn starch and alcohol has been re-adjusted back to 13%.
Though
the Chinese government is encouraging the export of corn starch by increasing
the export rebates rate, CCM believed that it is of little use to help the corn
starch industry in China because of the following reasons.
Trapped in overcapacity
Corn
starch deep-processing industry is an industry with serious overcapacity.
According to CCM's research, in 2015, only 56% operation rates in the
production guaranteed the enough supply for the corn starch processing
industry.
Capacity keeps expanding
In
H1 2016, affected by the temporary storage policy and auction policy in China, the
corn price was low in China. And the corn starch processing industry in North
China increased greatly in the profits, which led to the expanding capacity of
corn starch in 2016/17.
Based
on CCM's research, in 2016/17, it is expected that China will have a new
capacity of 3 million t/a for corn processing, including 2 million t/a of
capacity for corn starch processing.
Comparative advantage of corn starch is
what matters to export volume in China
In
fact, in 2015, the Chinese government also has the export rebates rate of 13%
on corn starch in China.
The export volume of corn starch was 74,000 tonnes in 2015, up 30.9% YoY.
However, the significant growth was attributed to the small figure of export
volume in 2014.
On
the contrary, in Jan. – July 2016, without the support of export rebates rate
in China,
55,235 tonnes of corn starch was exported, up 151% YoY.
That's
to say, the comparative advantage of corn starch is what matters to export
volume in China when it is compared to its rival commodities like Southeast
Asia cassava starch.
Taking
the advantages of the US corn and Southeast Asia cassava starch into
consideration, CCM believed that since Sept. 2016, the export volume of China corn starch will increase obviously, but the increasing volume is just several
thousand tones, which is hard for it to recover to its peak of over 400,000
tonnes of export volumes.
Even
if the export volume of corn China reaches 400,000 tonnes, it is hard to compete with the overcapacity of 13
million t/a.
In
all, the 13% export rebates tax can only benefit some exporting enterprises but
can not save the whole corn starch industry in China.
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Tags: Corn starch, Food