According to CCM, China's citric acid manufacturers reduced the price to stimulate the export volume in H1 2015, resulting in soaring export volume but slumping export price. This aggravated the losses of manufacturers.
In H1 2015, China's export market of citric acid did not perform well. Although export volume of citric acid recorded increases, the export price slumped compared to the same period last year.
According to China Customs, China exported 433,000 tonnes of citric acid in H1 2015, up 4.1% year on year. And the average export price was USD0.804/kg, down 10.2% year on year.
Of this, in June, the export volume was 63,300 tonnes, down 13.7% month on month while up 1.4% year on year. The export price was USD0.802/kg, the same with that in May but down 14.1% year on year.
China's exports of citric acid in Jan. 2014-June 2015
Source: China Customs
In H1 2015, China's exports of citric acid presents a situation of "volume up while price down" was mainly because manufacturers wanted to boost the export volume by setting low prices.
At present, China's citric acid suffers from overcapacity and seriously relies on exports. According to CCM, in 2014, China's capacity of citric acid reached 1.60 million t/a, while the domestic demand was only 250,000 t/a. Most of citric acid was export-oriented, with export volume accounting for about 75% of the total in China.
Nevertheless, in H1 2015, affected by the anti-dumping sanction of European Union and the US, China's export volume of citric acid to these two regions declined. Under the pressure of inventory and capital, manufacturers were forced to export citric acid to some countries of Southeast Asia those do not initiate anti-dumping sanction or have lower anti-dumping duty. Besides, since these countries in Southeast Asia cannot withstand high market price, Chinese manufacturers have to reduce the price to boost the export volume.
However, reducing the price to boost export volume directly led to serious losses of manufacturers.
In H1 2015, the average market price of corn (raw material of citric acid) was USD360.7/t (RMB2,206.7/t). While the average market price of monohydrate citric acid was only about USD764.4/t (RMB4,675.6/t). Based on the cost accounting scheme, producing one tonne of citric acid needs 1.5 tonnes of corn, 0.75 tonne of strain and production expenses including labor cost, depreciation of machinery and sales expenses of USD98.1/t (RMB600/t). After calculating, in H1 2015, the average loss of citric acid manufacturers was USD111.2/t (RMB680/t), not including profit of byproducts, soaring by 144% year on year.
Average profit of citric acid manufacturers in China, Jan. 2014-Aug. 2015
Source: CCM
Regarding the export situation in H1, two negative problems were found in China's citric acid market.
1. China has large capacity but has no pricing right of citric acid
Although China's the first largest citric acid manufacturer and exporter in the world, it has no pricing right for citric acid. This is mainly because China's citric acid enjoys low-content technology and is mainly low-end products. Since China's market for low-end products is of fierce competition, manufacturers have to seize market shares by compressing the price.
2. Citric acid manufacturers are too reliant on the export market
China's output of citric acid far exceeds the domestic demand and manufacturers are too dependent on exports to consume inventory. When facing trade friction and anti-dumping sanction, manufacturers have poor risk resisting ability. What they can do is only reducing operating rate and price to solve the inventory problem. Therefore, manufacturers suffer heavy losses.
If you want to know more about the Citric Acid industry, you can have a look at our product: Corn Product China News.
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. CCM is a brand of Kcomber Inc.
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