CSA found that profits of domestic saccharin producers decreased obviously in 2011 mainly due to high raw material cost and low selling price.

Guangzhou, Guangdong -- (SBWire) -- 05/02/2012 --From Feb. 27 to March 2, 2012, China Sugar Association (CSA), commissioned by the Ministry of Industry and Information Technology, ran a production examination on four state-mandated saccharin producers, namely Henan Kaifeng Xinghua Fine Chemical Factory (Henan Kaifeng), Tianjin North Food Co., Ltd. (Tianjin North), Tianjin Changjie Chemicals Co., Ltd. (Tianjin Changjie) and Shanghai Fortune Chemical Co., Ltd. (Shanghai Fortune). As disclosed in the examination, the profits of Chinese saccharin producers decreased obviously in 2011 due to high raw material cost and low selling price, according to CCM’s April issue of Sweeteners China News.

According to CSA's examination, the production plan of saccharin made by Chinese government was 19,000 tonnes in 2011, among which 3,200 tonnes was planned to be sold in China, and the left was planned to be exported. In fact, according to CSA, the actual output of saccharin was 18,204.34 tonnes in 2011, which completed 95.81% of the total production plan. In 2011, domestic sales volume and export volume of saccharin were 2,872.51 tonnes and 14,361.84 tonnes respectively, indicating that about 1,000 tonnes of saccharin was stocked. What's more important, CSA found that the overall profits of saccharin producers decreased obviously in 2011, and some producers even suffered loss or were on the verge of loss.

Firstly, high raw material cost exerted pressure on saccharin producers' profit obtaining. Phthalic anhydride is a key raw material for saccharin production, and China has mainly imported it to meet the domestic demand. However, the average import price of phthalic anhydride mainly showed a rising trend in 2011 over 2010 (FIGURE1). Referred to China Customs, the average import price of phthalic anhydride was about USD1,032/t in 2011, up 23% over 2010, which increased the raw material cost of saccharin. According to a salesman of Shanghai Fortune, the company's cost rose sharply in 2011, and its average purchasing price of phthalic anhydride showed an uptrend from 2011 to now, which climbed from USD1,300/t in 2011 to USD1,800/t in March 2012.

Unfortunately, the selling price of saccharin even fell in 2011 rather than increase with the sustained growth of phthalic anhydride's. According to CCM International's Sweeteners Database, the average ex-factory price of saccharin was lower in 2011 over 2010 (FIGURE2), which further reduced domestic saccharin producers' profits combined with the price increase of phthalic anhydride during 2011. For example, the average ex-factory price of saccharin in 2011 was USD6,006/t, with a year-on-year decrease of 7%, which may be driven by the intense competition in Chinese sweetener industry and illegal saccharin production. On one side, competition in domestic sweetener industry has become more and more intense owing to the emergence of new players and new capacities of other sweeteners, which continuously took up saccharin's market share, leading to its price drop. On the other side, saccharin has always been produced illegally in China in recent years, whose sales also reduced the demand for saccharin produced by the four manufacturers.

In Q1 2012, it is estimated that saccharin's profit may also decrease. For example, the average import price of phthalic anhydride kept on rising to USD1,632/t, while the average ex-factory price of saccharin decreased to USD5,262/t in Feb. 2012, indicating profit of saccharin may continue to decrease in Q1 2012. Though Chinese government declared that it will enhance the supervision of illegal saccharin production in 2012 and rectify the order of domestic saccharin market, the price increase of raw material, the price decrease of saccharin and the intense competition in sweetener industry will remain in the future, so saccharin's profit is likely to decrease in 2012.

Source: Sweeteners China News 1204
http://www.cnchemicals.com/Newsletter/NewsletterDetail_190.html

Content of Sweeteners China News 1204:
Ganzhou Julong passes acceptance inspection of medicinal stevia production
China imports 235,932 tonnes of sucrose in Jan.-Feb. 2012
Export value of Chinese stevia sweetener sees decrease in 2011
Huaxing invests in xilitol project in Harbin
Angel Yeast to construct 3,000t/d beet processing line
Sugarcane planting area may reach 67,000 ha. in Hainan Province
Profits of Chinese saccharin producers decrease in 2011
China's aspartame output stabilizes in 2011
Inadequate sucrose supply may increase demand for sweeteners in China
Zhongdu Sugar starts to build a HFCS project with capacity of 1 million t/a
Operating profit of Shandong Longlive decreases by 7.12% in 2011
Xinjiang Hengfeng may withdraw from XOS market
A stevia sweetener project to settle in Shuangfeng Economic DevelopmentZone
Profit of QHT decreases in 2011

If you are interested in CCM International’s March issue of Sweeteners China News, please do not hesitate to contact us by +86-20-37616606, or email us at econtact@cnchemicals.com.

(Guangzhou China, April 6, 2012)

Sweeteners China News is a monthly newsletter published by CCM International Limited. Based on China market, CCM offers timely update and close follow up of China’s various kind of sweeteners market dynamics, analyze the market data and trends, Major columns include market dynamic, company dynamic, raw material supply, price update, import & export analysis, Consumption Trend & Competitiveness.

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