Anhui Jinhe Industrial Co., Ltd. (Anhui
Jinhe) recently announced that it had formally commenced a project of expanding
its sucralose capacity by 1,500 t/a on 28 Sept., 2016, and the new capacity
would be released in late March next year as planned. With USD68.65 million
(RMB460 million) invested in, the project will enable the company to scale up
its sucralose capacity from 500 t/a (fully utilised in June 2016) to a total of
2,000 t/a.
Source: Baidu
Under the backdrop of short sucralose
supply and increasing product price, Anhui Jinhe's capacity expansion will help
it maintain high profitability.
Since May 2016, the price of sucralose has stayed high in China. Specifically,
according to CCM's price monitoring, the national average ex-works price of the
product reached USD83,104/t (RMB555,000/t) this Sept., a 107.86% increase over
the January 2016 figure.
The high price is chiefly backed by a shortage of the product's market supply.
Facing ever stricter official supervision over waste treatment in production,
sucralose producers in China have generally reduced their output, leading to
drop in overall supply. Moreover, JK Sucralose Inc. (JK Sucralose), the largest
manufacturer of the product in China, started to idle its production line from
late July this year due to environmental problems found in waste treatment
equipment of its sucralose production facilities, further intensifying the
tight supply.
In addition, the highly profitable sucralose would be supportive to Anhui
Jinhe's overall profitability.
As shown in the 2016 semi-annual report of the company, gross margin of its
sucralose business reached as high as 26.83% in the past half of 2016. Although
this business segment just accounted for a mere 1.28% of its revenue during the
said time period, when the company realised the above-mentioned capacity
increase, it can benefit more from it. Estimation of the gross profit of 1,000
tonnes of sucralose sold additionally made by sources from the securities
market is more than USD22.39 million (RMB150 million) on the condition that the
product price could remain stable.
Monthly ex-works price of sucralose in
China, Jan.-Sept. 2016
Source: CCM
Increasing its sucralose capacity is just
one of the moves of Anhui Jinhe to ensure its profitability.
On 20 Sept., 2016, the company disclosed plans to initiate production and sales
of six products including food flavoring, compound food additives, hydrochloric
acid, formic acid, neopentyl glycol and sodium sulfate, which are mostly fine
chemicals. The 2016 semi-annual report of the company shows that the average
gross margin of its fine chemicals was as high as 38.77% in the first half of
2016.
What's more, the company's international trading business keeps growing. To
avoid possible impact on its operating performance caused by the large
fluctuations of exchange rate, Anhui Jinhe decided on 21 Sept., 2016 that the
company and its holding subsidiaries would start foreign exchange hedging in
bank with investment no more than USD100 million or in any other foreign
currency with equivalent value.
So far, acesulfame-K (ace-K) is an
important contributor to help maintain Anhui Jinhe's profitability.
In the past months of 2016, the price of ace-K has been rising because of the
short supply and price hike of diketene (DK), key raw material of the product.
In detail, the national average ex-works price of ace-K was USD7,337/t
(RMB49,000/t) in Sept., increasing by 32.54% over Jan. this year.
It's predicted that supply of DK would remain tight, and ace-K's price would
therefore stay high in the rest months of 2016. Having enlarged its capacity of
ace-K from previous 9,000 t/a to 12,000 t/a in the first half of 2016, Anhui
Jinhe would continue to profit from this.
Gross margins of Anhui Jinhe's major
products, H1 2016
|
No.
|
Product
|
Gross
margin
|
YoY
change, percentage point
|
|
1
|
Sulphuric
acid
|
58.13%
|
30.42
|
|
2
|
Methyl
maltol
|
51.95%
|
6.69
|
|
3
|
Ethyl
maltol
|
43.70%
|
6.67
|
|
4
|
Acesulfame-K
|
31.88%
|
2.19
|
|
5
|
Hydrogen
peroxide
|
28.46%
|
14.95
|
|
6
|
Sucralose
|
26.83%
|
/
|
|
7
|
Melamine
|
25.38%
|
27.88
|
|
8
|
Pyridine
hydrochloride
|
19.73%
|
-20.27
|
|
9
|
Others
|
13.52%
|
-6.38
|
|
10
|
Ammonium
bicarbonate
|
13.14%
|
0.55
|
|
11
|
Liquid
ammonia
|
5.16%
|
-11.61
|
|
12
|
Nitric
acid
|
4.60%
|
0.35
|
|
13
|
Trading
|
3.77%
|
/
|
|
14
|
Pentaerythritol
|
-4.56%
|
-3.99
|
Source: Anhui Jinhe Industrial Co., Ltd.
Anhui Jinhe still faces uncertainties in
its future operation.
In the domestic sucralose market, the company is confronted with competition
from not only JK Sucralose but also other rivals including Unisweet (Shandong)
Sucralose Manufacturing Co., Ltd., Changzhou Niutang Chemical Plant Co., Ltd.
and Ji'an New Trend Technology Co., Ltd., which are all leading sucralose
manufacturers and have captured certain market shares. CCM reckoned that
improving product quality is also important to Anhui Jinhe besides capacity
expansion if it wants to effectively increase its market share and profits.
This article comes from Sweeteners China News 1610, CCM
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Tag: sucralose sweeteners