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Consolidation of Domestic MSG Industry Drawing to an End (20130722) (1)

Consolidation of Domestic MSG Industry Drawing to an End (20130722) (1)

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Published by: CCM International Limited on Jul 24, 2013
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02/26/2014

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Consolidation of domestic MSG industry drawing to an end
Summary:
 After years of restructuring, the consolidation of China's MSG industry appears to be comingto an end.
 Tags:
MSG industry, monosodium glutamate, fermentation product, capacity, Fufeng Group
 
 After years of restructuring, the consolidation of China's monosodium glutamate (MSG)industry appears to be coming to an end, according to CCM
s latest report, Corn ProductsChina News issued in July 2013.The MSG is a fermentation product with the high energy consumption and the high pollution,which makes Chinese government strictly limit its development. To tackle these problems, in2011, the Ministry of Industry and Information Technology of China (MIIT) issued a policy tocall for the elimination of older, inefficient plant technology that uses more energy or createsmore pollution than a specific industry average. 19 key industries are involved, including theMSG industry.The MIIT data shows that China eliminated 84,000t/a of inefficient capacity in 2011 andanother 143,000t/a capacity in 2012. A further 285,000t/a of capacity will be eliminated in 2013.It is believed that the consolidation of the domestic MSG industry will be completed within thisyear.The result has been a massive decline in the number of MSG producers and a major shift inthe center for MSG production. In the 1990s, there were more than 200 MSG companies inChina. Now there are fewer than 50. Those which remain are bigger and more efficient. Over the last two years, many small producers in the Northern and Eastern areas of the countryhave closed down, leaving the center of production in the Northeast, Northwest and Inner Mongolia. These areas enjoy a good supply of raw materials and the energy needed to makeMSG. As a result, by 2012 nine of China's top MSG producers had the capacity exceeding100,000t/a. These nine companies had a combined capacity of 2,980,000t/a - accounting for over 80% of China's total capacity of MSG. Three of the nine are really huge, with more than300,000t/a capacity and accounting for roughly half of China's total capacity of MSG. They areFufeng Group Co., Ltd.(Fufeng Group), Meihua Holdings Group Co., Ltd. (Meihua Group) andHenan Lotus Flower Gourmet Powder Co., Ltd. (Henan Lotus).Normally, big companies could further strengthen their leading positions as the consolidationof the MSG industry undergoing. However, it will not be all smooth sailing for the more efficientgiant producers. Although many small MSG companies have been eliminated, the total domestic MSG capacityis still increasing, due to capacity expansion by big companies. Fufeng Group's MSG capacity
 
reached 1,000,000t/a in 2012, and the company produced 970,000 tonnes of MSG - up 49%from 2011. Sales climbed 53% to 940,000 tonnes. As a result, as for some big MSGcompanies which didn't expand their capacities, their market shares are decreasing.Increasing capacity has also pushed down prices. Fufeng Group, the biggest MSG company inChina, adopted a low-price strategy to capture more market share. Fufeng Group's 2012annual report shows it sold MSG for 11% less in 2012 than it did in 2011. Rising raw materialsprices such as for corn also put pressure on the profit margins. According to the annual reportsof Fufeng Group, Meihua Group and Henan Lotus, their profit margins of MSG business allshow a down trend.However, there is no need to be pessimistic. In general, the consolidation is benefit for the longterm development for the MSG industry, and the profit margin of MSG may witness a slightrebound in the near future.
Table of Contents of  Corn Products China News 1307: 
Editor’s note
HeadlinesSupply and demandConsolidation of domestic MSG industry drawing to an endCrystalline fructose industry faces both opportunities and challengesImport & export analysisChina's mannitol export volume shows recovery in Jan.-May 2013Chinese corn products Imp. & Exp. analysis in May 2013Price updatePrice update of corn products in July 2013Domestic ex-work price of citric acid rebounded in June 2013Ex-works price of threonine declined in H1 2013Market and company dynamicsBaolingbao to buy bank financial products with no more than USD65.25 millionFufeng Group makes the list of top 100 enterprises in light industries againPolicyChina increases temporary reserve price of corn in 2013/2014Chinese government has approved two GM corns importCompetitivenessConsumption of wheat used as feed to decline this year News in brief China Starch's financial performance to decline in the first five months of 2013USDC launches preliminary administrative ruling on Chinese citric acid and citrateCargill Luohe's high-fructose corn syrup project put into operationZhejiang Fuel's bio-fuel ethanol project startedChina to complete the target of backward capacities elimination(2011-2015) ahead of scheduleLonglive Bio-technology launched a new functional food containing XOS

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