corn products china news 1101 sample for 2011

Copyright © CCM International Limited

Corn Products China News

Vol.4 Issue 1, 2011

Corn Products

Corn Products China NewsVol. 4 Issue 1. 2011 Publication date: 20 January, 2011

CONTENTS

Welcome to the January issue of CornProducts China News, specially published by CCM International.

Main companies mentioned in this issue

News in Brief1 Baolingbao Biology considers transferring raw material price increasing risk through

hedge service

1 CornStarchinTielingCityfirstlyexportedtooversea

1 AnhuiBBCAobtainsvalueaddedtaxrefunding

1 Chinese CPI in 2010 rises by 3.3%

1 The6thChina(Shanghai)InternationalStarch&StarchDerivativesExhibition2011to

be hold

Supply and Demand2 ChinatoimposeVCexportquotain2011?

ImportandExportAnalysis3 ChinesecornproductsImp.&Exp.analysisinNovember2010

Price Update6 Ex-factorypricesofcornproductsinDec.2010

6 FOB corn price in Dalian Port from Feb. 2010 ~ Jan. 2011

7 Domestic citric acid price keeps uptrend

8 China's cornstarch price decreases

Market & Company Dynamic9 DDGSfromtheUSfacesanti-dumpinginvestigationinChina

10QuantumHigh-Techsucceedsingettinglisted

11 Meihua Group's dream of listing comes true

13 ShanxiHuaronginitiates60,000t/acitricacid

14 Alliance for China's amino acid industry established

15 XiwangFoodtoexpandrefinedcornoilcapacity

Competitiveness15 Sucrose price or to keep uptrend in near future

Corn Supply16 Analysis into China's corn market in 2011

New Technology & New Products & R&D17 Newenergy-efficientfermentationbiotechnologypromoted

Stepping into 2011, prices of most corn products stably run at a relative high level, caused by stably highcornprice.However,itstillhasexception.Priceof cornstarch has decreased in Jan. 2011 all over the country, and VC price still undergoes a low level at the same time. In this issue, CCM has tried to predict that Chinese government is likely to impose exportquotaonVCindustry.Inaddition,anothertrade friction between the US and China happened at the end of 2010, that is, China decides to run an anti-dumpinginvestigationintoDDGSoriginatedfrom the US.

In 2011, Chinese corn products industry will be full ofopportunities.Twocompanies(QuantumHigh-tech and Meihua Group) succeed in getting listed toexpand theirbusinesses,andanewcompany(ShanxiHuarong)marchesintocitricacidindustry.

By the way, it would be honored to tell you that 2011 is the10-yearAnniversaryofCCM,andCCMwillcontinue to provide you more professional, timely, accurate and complete news to you.

Corn Products China News Vol. 4 Issue 1. 2011

CCM International Limited www.cnchemicals.com1

Corn Products China News at a glance News in Brief

1

There is a possibility for Chinese government to impose VCexportquotaonVCin2011.

In November 2010, performance of Chinese corn products’ imports still witnessed downtrend, and import volume decreased by 68% over October 2010. In contrast, theexportvolumerebounded,whichincreasedby16%.

Chinarunsanti-dumpinginvestigationintoDDGSfromthe US.

QuantumHigh-TechsucceedsingettinglistedinChina'sGrowth Enterprises Market, which will facilitate it to raise fundsforitsbusinessexpansion.

Meihua Group succeeds in getting listed at the end of 2010,anditwillexpanditsbusinessesinthenearfuture.

ShanxiHuarongbeginstoestablishananhydrouscitricacidproductionplantwithcapacityof60,000t/a.

Amino Acids Industry Technology Innovation and Strategic Alliance has been established at the end of 2010.

XiwangFoodplanstoexpanditsrefinedcornoilcapacityto350,000t/afrom200,000t/a.

Domestic citric acid price still maintains uptrend at the beginning of 2011.

Domestic cornstarch price decreases in January 2011.

Sucrose price in China is increasing at present, and may maintain at high level in 2011.

Corn price will keep at a high level in 2011 as its undersupply situation.

Anewenergy-efficient fermentationbiotechnology ispromoted by the country.

Baolingbao Biology considers transferring raw material price increasing risk through

hedge service

On January 17, 2011, Baolingbao Biology Co., Ltd. announced that at present the company considers transferring the risk of raw material

price increase through hedge service, but there are no specific plans or programs at present.

CornstarchinTielingCityfirstlyexportedto oversea

On December 23, 2010, 240.75 tonnes corn starch, produced by Tieling WanshundaStarchCo.,Ltd.wasexported toSingaporeafterbeing

quarantinedbyTielingEntry-ExitInspectionandQuarantineBureau.ThisisthefirsttimeforcornstarchproducedinTielingCity,LiaoningProvincetobeexported.

AnhuiBBCAobtainsvalueaddedtaxrefunding

On January 11, 2011, Anhui BBCA Biochemical Co., Ltd. announced thatafterbeingexaminedandverifiedbytheMinistryofFinance,the

paidvalueaddedtaxin2009ofaboutUSD3.81millionispermittedtoberefunded.ThisvalueaddedtaxwillbereckonedinNon-operatingincomein2010.

Chinese CPI in 2010 rises by 3.3%

On January 20, 2011, National Bureau of Statistics of China announced that theConsumerPrice Index (CPI) in2010 roseby3.3%over

that in 2009, and in December 2010, the CPI increased by 4.6% over the corresponding time of 2009 and 0.5% over last month.

The 6th China (Shanghai) International Starch&StarchDerivativesExhibition

2011 to be hold

The 6th China (Shanghai) International Starch & Starch Derivatives Exhibition2011willbeheldonMay26-28,2011,inShanghaiEverbright

Convention&ExhibitionCenter.



Supply and Demand

In August 2010, when domestic price of Vitamin C (VC) slumped to its

lowest level, it was reported that National Development and Reform Commission (NDRC) wou ld impose VC expor tquotaattheendof2010forthehealthydevelopment of this industry. However, until now, the measure has not come outyet,andsomeexpertsconsider themeasure will be published and carried out in 2011, while others don't think so. Hereinafter, analysis will be made into thisquestion:WillChinesegovernmentimposeVCexportquotain2011?

Let'sfirstunderstandcurrentsituationofChinese VC industry. On one hand, total capacityofChineseVCproductdefinitelyexceeds the global demand. China'stop five large VC companies' capacity (124,000t/a in 2010) has accountedfor about 90% of global VC capacity. Andsomeexpansionprojects are stillbeing under construction right now. It is estimated that total capacity of VC in Chinawillclimbto200,000t/ain2012.The terrible overcapacity situation has causedseriousresourcewasteandcut-throat competition in domestic market, which hinders healthy development of this industry.

On the other hand, VC price has situated at a low level at present, hurting most VC manufacturers in China. Although VC price has rebounded a little since October 2010 aided by the production suspensionofsomemajorVCproducers,likeShijiazhuangPharmaceuticalGroupCo.,Ltd.,(ShijiazhuangPharmaceutical)it still stays at a low level at present. On Jan. 11th 2011, the average VC price in ChinawasaboutUSD6,798/t,while itwasUSD11,730/tincorrespondingperiodof 2010. (FIGURE1) Besides, despite its exportvolumeincreasedsignificantly in2010,averageexportpricewentdownover 2009, caused by the increased output of Chinese VC. (FIGURE2)

On the basis of the above situation, it is urgenttoregulatethisindustryandexport

quotameasure soundsa suitableway.Exportquotameasuremeanstheannualexportvolumewillbecontrolledbythegovernment,andeachqualifiedexporter,including manufacturers and traders, will beassignedanannualspecificquotaofthetoplimitexportvolume,andthistoplimit volume will be decided by capacity and previous export volume of eachmanufacturer. The measure can bring the following advantages.

First, the measure can eliminate some small manufacturers and turn around current overcapacity situation to some extent.Normally,thesmallmanufacturersare unqualified to get export quota,e s p e c i a l l y t h o s e w i t h i n e f f i c i e n t technology and high pollution. Thus, these manufacturers will be driven back from the international market, and it is likely for them to get out of this industry.

Second, it canease current cut-throat

ChinatoimposeVCexportquotain2011?

FIGURE1:DomesticVCpriceinChina,2009-2010

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2 ,000

4 ,000

6 ,000

8 ,000

1 0,000

1 2 ,000

1 4 ,000

1 6 ,000

Ja n Feb Ma r A pr Ma y Ju n Ju l A u g Sep Oct Nov Dec

Unit:USD/t

2 009 2 01 0

Source: CCM International

FIGURE2:ExportpriceandvolumeofChineseVC,2009-2010

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2 ,000

4 ,000

6 ,000

8 ,000

1 0,000

1 2 ,000

1 4 ,000


Un

it:

ton

ne

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Unit:USD/t

Expor t v olum e2 009 Expor t v olum e2 01 0

Expor t pr ice2 009 Expot pr ice2 01 0




competition, and enhance Chinese VC pricing power. Currently, theexportpriceiscutdownbyforeignbuyersastherearelotsofexportersforthemtochoose.Andinordertoseizemoremarketshare,manyexporterslowertheirquotations.Ifthemeasureiscarriedout,themajorexporterscanmakealliancetostrengthenthepricingpower.Besides, it also canavoid anti-dumpinginvestigation.

Therefore, it'spredictedthat it isquiteprobable forChinatoimposeexportquotaonVC in2011.Thegovernmentshouldenhance the supervision on the implementation of this measure, if not, the measure would lose its role.

ImportandExportAnalysis

ChinesecornproductsImp.&Exp.analysisinNovember2010

TABLE1:Imp.&Exp.valueofChinesecornproducts,November2010

ProductsImport

value, USDMonthly

growth rateExport

value, USDMonthly

growth rate

Corn 17,423,036 -70% 2,459,110 85%

Cornstarch 874,210 -25% 11,433,831 -20%

Citric acid 413,550 114% 66,158,728 39%

Citrate 169,746 -43% 10,718,069 38%

Glucose and glucose syrup (Fructose content <20%)

98,831 -47% 26,322,742 25%

G l u c o s e a n d s y r u p (50%>fructosecontent≥20%)

534,176 -13% 732,785 80%

Fructose and fructose syrup (Fructose content >50%)

622,114 -5% 6,606,504 4%

Mannitol 50,523 35% 1,136,223 34%

Xylitol 10,306 -96% 3,209,948 -9%

Sorbitol 37,089 -7% 4,771,691 15%

Furfural 169,674 42,532% 7,622,128 29%

F u r f u r y l a l c o h o l a n d tetrahydrofurfuryl alcohol

140,920 428% 13,323,827 -7%

Lysine 7,710 -93% 4,416,869 198%

Lysine ester and salt 156,701 -83% 12,943,560 -9%

Glutamic acid(GA) 8,275 88% 2,366,670 138%

Sodium glutamate 50,723 46% 25,046,846 0%

Inositol 21,403 28% 2,093,028 -25%

Total 20,788,987 -67% 201,362,559 17%

Source: China Customs

1.Imp.&Exp.valueanalysis(TABLE1)

1.1 Thanks to the surge of import volume, the import value of furfural increased by 42,532% in November 2010 over October 2010, althoughitsimportpricedecreasedtoUSD547/t,comparedwithUSD39,800/tinOctober2010.Infact,Chinatotallyimportedabout310tonnesfurfuralfromIranthisNovember,whilethenumberwaszeroinpreviousmonths.AndtheimportedfurfuralalmostflowedtoXiamenCity,FujianProvince.

1.2Owingtotheincreasedexportvolumeofglucoseandsyrup(50%>fructosecontent≥20%),itsexportvalueincreasedby80%inNovember2010overOctober2010.PhilippinesincreaseditsimportvolumeoftheproductfromChinasignificantly,amountingto916tonnes,whileitwasjust22tonnesinOctober2010.Besides,PapuaNewGuineaimported179tonnesofthisproductinNovember2010,withthelowestpriceofUSD468/t,comparedwiththehighestpriceofUSD2,406/ttoGermany.Moreover,becauseVietnam,thelargestexportdestinationwiththerelativelyhighpriceofUSD2,050/tlastmonth,didn’timporttheproductinNovember2010.Theexportpricereducedby60%.



2.Imp.&Exp.volumeanalysis(TABLE2)

2.1ThemajorreasonfortheincreaseinimportvolumeofmannitolinNovember2010isthatChinaincreasedtheimportvolumeof this product from France this month over last month. The import volume of mannitol in November 2010 is 8 tonnes compared withjust2tonneslastmonth.About8tonnesofmannitolimportedwenttoShanghaiCity.

2.2 Probably caused by the approaching of cold weather and the increasing demand for meat, many countries in Europe increased theirimportvolumeoflysinefromChinainNovember2010.TakePoland,Netherlands,andUkraineforexample,theyimported565 tonnes, 248 tonnes, and 109 tonnes lysine from China separately, while these three countries' import volume from China was zerolastmonth.Besides,BelgiumalsoalmostdoubleditsimportvolumeoflysinefromChinainNovember2010,amountingto720 tonnes.

2.3ExportperformanceofGlutamicacid(GA)wasalsogoodinNovember2010.Vietnam,theUS,andItalyincreasedtheirimportvolume of GA from China, amounting to 1,420 tonnes, 20 tonnes, and 5 tonnes, rising by 203%, 1,200%, and 2,400% separately.

TABLE2:Imp.&Exp.volumeofChinesecornproducts,November2010

ProductsImport

volume, tonneMonthly

growth rateExport

volume, tonneMonthly

growth rate

Corn 78,555 -69% 8,546 77%

Cornstarch 1,248 -17% 25,749 -20%

Citric acid 129 43% 68,674 36%

Citrate 41 -21% 10,845 43%


84 -23% 54,769 24%

Glucose and syrup (50%>fructosecontent≥20%)

1,987 -12% 1,182 346%


264 39% 12,124 -1%

Mannitol 10 208% 617 30%

Xylitol 1 -99% 1,165 -10%

Sorbitol 37 95% 8,440 15%

Furfural 310 3,100,650% 3,657 24%

Furfuryl alcohol and tetrahydrofurfuryl alcohol

16 142% 5,084 -16%

Lysine 0.16 -95% 2,564 201%

Lysine ester and salt 7 -99% 7,409 -20%

Glutamic acid(GA) 0.36 8% 1,670 142%

Sodium glutamate 20 0% 17,068 -2%

Inositol 0.38 28% 201 -28%

Total 82,710 -68% 229,763 16%


3.Imp.&Exp.priceanalysis(TABLE3)

3.1 Thanks to the price surge of citric acid from Germany and Austria, the average import price of citric acid increased by 50% in November2010.ImportpriceofcitricacidfromGermanyandAustriawasUSD2,346/tandUSD4,002/tinNovember2010,whileitwasUSD2,061/tandUSD1,678/tinOctober2010respectively.Besides,GermanywasthelargestimportoriginofChinesecitricacid in November 2010, and Austria was the third largest.

3.2 In November 2010, China began to import Fructose and fructose syrup (Fructose content >50%) from Israel and Pakistan, with importvolumeofabout40tonnesforeachrespectively.Andtheimportpricefromthesetwocountries(USD1,185/tandUSD850/trespectively) was much lower than that of other countries. Moreover, the import price from the largest import origin, South Korea, decreasedtoUSD1,578/tinNovember2010fromUSD2,238/tinOctober2010.Therefore,theimportpriceoftheproductreducedby 32% in November 2010.



TABLE3:Imp.&Exp.priceofChinesecornproducts,November2010

ProductsImport price,

USD/tMonthly

growth rateExport price,

USD/tMonthly

growth rate

Corn 222 -4% 288 5%

Cornstarch 700 -9% 444 0%

Citric acid 3,217 50% 963 3%

Citrate 4,132 -28% 988 -3%


1,174 -31% 481 0%


269 0% 620 -60%


2,358 -32% 545 5%

Mannitol 5,028 -56% 1,842 3%

Xylitol 7,928 215% 2,756 0%

Sorbitol 1,002 -52% 565 0%

Furfural 547 -99% 2,085 4%


8,904 118% 2,621 11%

Lysine 49,742 54% 1,723 -1%

Lysine ester and salt 22,873 1,175% 1,747 13%

Glutamic acid(GA) 23,050 74% 1,417 -1%

Sodium glutamate 2,517 46% 1,467 1%

Inositol 55,737 -0.15% 10,421 5%


4. Export des t inat ions ana lys i s(TABLE4)

4.1Themajor reason for decreased exportproportion of top five and top ten destinations of corn starch is that the largest exportdestination, Indonesia, decreased its import volume markedly in November 2010 to 9,926 tonnes, while it was 20,087 tonnes in October 2010.

TABLE4:Exportproportionoftop5andtop10destinationsofChinese

corn products by volume, October ~ November 2010

ProductsNov-10 Oct-10

Topfive Top ten Topfive Top ten

Corn 100% 100% 100% 100%

Cornstarch 89% 97% 95% 99%

Citric acid 33% 49% 30% 48%

Citrate 38% 59% 41% 64%


61% 77% 54% 77%


97% 100% 84% 100%


92% 99% 96% 99%

Mannitol 72% 87% 81% 93%

Xylitol 86% 96% 86% 98%

Sorbitol 64% 80% 65% 86%

Furfural 97% 100% 97% 100%


76% 89% 78% 92%

Lysine 76% 90% 91% 100%

Lysine ester and salt 58% 76% 60% 77%

Glutamic acid(GA) 99% 100% 99% 100%

Sodium glutamate 57% 77% 55% 74%

Inositol 56% 78% 57% 80%


4.2InNovember2010,India,Japan,andBrazildecreased their import volume of mannitol from China, which amounted to 144 tonnes, 61 tonnes and 19 tonnes, while the import volume in October 2010 was 167 tonnes, 81 tonnes, and 48 tonnesrespectively.Thus,theexportproportionoftopfiveandtoptendestinationsofmannitolin November 2010 declined.



Price Update

Ex-factorypricesofcornproductsinJan.2011

ProductsPrice in January 2011 Price in December 2010

(USD/t) (RMB/t) (USD/t) (RMB/t)

Corn starch (North China) 440 2,920 450 3,000

Corn starch (South China) 490 3,250 503 3,350

Ethanol (Industrial grade) 837 5,550 818 5,450

Ethanol (Food grade) 1,000 6,633 980 6,533

80% Maltose syrup 473 3,140 488 3,250

70% Sorbitol 660 4,378 690 4,600

Monohydrate citric acid 980 6,497 953 6,350

Oxidizedstarch(Foodgrade) 995 6,600 983 6,550

68%Xylitol(Liquid) 838 5,560 834 5,560

HFCS (Fructose: 42%) 475 3,150 465 3,100

HFCS (Fructose: 55%) 618 4,100 600 4,000

Crystal Isomaltitol 4,297 28,500 4,502 30,000

Maltodextrin 568 3,765 556 3,705

75%Maltitol(Liquid) 658 4,365 660 4,400

Anhydrous glucose (Food grade) 761 5,050 752 5,010

Glucose Monohydrate 550 3,650 540 3,600

Itaconic acid 2,200 14,593 2,200 14,661

98.5% lysine 2,156 14,300 2,236 14,900


FOB corn price in Dalian Port from Feb. 2010 ~ Jan. 2011

2 5 0

2 6 0

2 7 0

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2 9 0

3 00

3 1 0

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3 3 0

Unit,USD/t

Cor n 2 6 7 2 7 8 2 8 2 2 9 0 2 9 2 2 8 8 2 9 7 2 9 4 2 9 9 3 1 4 3 1 1 3 1 0

26 -Feb

1 9 -Ma r

20-A pr

20-Ma y

2 1 -Ju n

20-Ju l

1 8-A u g

20-Sep

20-Oct

1 9 -Nov

1 7 -Dec

20-Ja n




Domestic citric acid price keeps uptrend

Entering the new year 2011, domestic citric acid price witnesses uptrend,

majorlyaidedbythepriceincreaseofitsrawmaterialandauxiliarymaterial. InJanuary 2011, the price of monohydrate citricacidaveragelyreachedUSD980/t all over the country, increasing by 2.8% over that at the end of 2010. (FIGURE3)

Domestic quotation ofmonohydratecitric acid in Anhui BBCA Biochemical Co., Ltd. (Anhui BBCA), China's leading citric acid enterprise,wasUSD1,118/t on Jan. 13th 2011, and the company hasstopped itsdomesticquotation foranhydrous citric acid. An insider from the company disclosed that all the anhydrous citricacidwasforexport,thusnoproductcan be supplied to domestic market. He also expresses that theprice increasewas mainly caused by the upgoing raw material price.

At the same time, Weifang Ensign Industry Co., Ltd. (Weifang Ensign) quoted its anhydrous citric acid andmonohydrate citricacidatUSD1,193/t and 1,088/t for domesticmarketrespectively. Besides, another smaller c i t r i c a c i d m a n u f a c t u r e r , n a m e l y HuangShi XingHua Biochemical Co., Ltd.,madequotations for anhydrouscitric acid and monohydrate citric acid at USD1,186/tandUSD1,065/trespectively.Sales managers from both these two companiesalsoexpress that thepriceascending is supported by the high price of corn and sulphuric acid.

It's well known that Chinese corn price haskeptincreasingin2010,whichexertscostpressureoncorndeep-processingmanufacturers and drives up price of most corndeep-processingproducts.Although in Jan. 2011 corn price stops surging, it still runs at high level. On Jan. 13th 2011, corn price in Weifang City, Shandong Province maintained at USD309/t.

Asthemajorauxiliarymaterialofcitricacid, sulphuric acid's price also has impacted on citric acid price. In 2010, sulphuric acid price has also surged significantly, like most commodities in China, which is caused by domestic

inflation.Sulphuricacidprice jumpedtoUSD100/t inJan.2011,while itwasUSD52/tatthecorrespondingperiodoflast year. (FIGURE4)

By the way, citric acid also achieved sound exportperformance inNov.2010,withbothexportvolumeandprice increase.(FIGURE5)Someexpertsconsideredthat

RMB appreciation is one of the factors for exportpriceincreaseofcitricacid.

However,someexpertsalsoconcernsthatif exportvolumeof citricacid reducesin2011 for someanti-dumping issues,domestic citric acid price will decrease, as about 73% of Chinese citric acid is for exports.

FIGURE3: Average price of monohydrate citric acid in China, 2010 ~ Jan. 2011

0

2 00

4 00

6 00

8 00

1 000

1 2 00

Jan-1 0

Feb-1 0

Mar-1 0

Apr -1 0

May -1 0

Jun-1 0

Ju l-1 0

Aug-1 0

Sep-1 0

Oct-1 0

Nov -1 0

Dec-1 0

Jan-1 1

Unit:USD/t


FIGURE4: Average price of sulphuric acid in China, 2010 ~ Jan. 2011

0

2 0

4 0

6 0

8 0

1 00

1 2 0

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Jan-1 0

Feb-1 0

Mar-1 0

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May -1 0

Jun-1 0

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Aug-1 0

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Oct-1 0

Nov -1 0

Dec-1 0

Jan-1 1

Unit:USD/t


FIGURE5:ExportpriceandvolumeofChinesecitricacid,Jan.~Nov.2010

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3 0,000

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onn

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Unit:USD/t

Expor t v olum e Av erageexpor t pr ice




China's cornstarch price decreases

Marching into 2011, domestic price of cornstarch witnesses

downtrend a l l over the country . (TABLE5) Take Changchun City , WeifangCity,andGuangzhouCity forexample,averagecornstarchprice inthesethreecitiesreducedtoUSD453/t,USD471/t andUSD491/t in Jan.2011, down 4.4%, 1 .6% and 1 .9% separately over last month. (FIGURE6) Thefollowingreasonscanexplainthedecrease of cornstarch price.

Firstly, market demand for cornstarch is decreasing. During October and November 2010, lots of cornstarch consuming companies rushed to purchase cornstarch to increase their stock in order to guarantee their production before Chinese Spring Festival, so the cornstarch price was pushed uptrend at that time. However, after that, demand from most of the downstream manufacturers reduced. Thus, cornstarch companies have to lowertheirquotations.

Secondly, small manufacturers decrease their pr ices in order to increase their sales volume and reduce their stock. Attracted by the comparatively high profit margin since H2 2010 (an executive officer fromCOFCOdisclosed that the profit margin of corn starch in Sept. 2010 reached USD15/t.),manysmallmanufacturersrushed into cornstarch production at that time, which increased cornstarch supply in China. Besides, many small manufacturers cut their prices, for current low transaction rate and their high stock.

Thirdly, theproductqualityof smallmanufacturers is inferior, thus, their prices are much lower than that of large

manufacturers, which also has impact on the price decrease of cornstarch.

Someone may think the supply increase of corn in the market since Oct. 2010 would be also a factor for cornstarch price decrease, however, it might not be the key reason as CCM estimated. Although newly harvested corn has been marketed, its price still stays at a high level,forexample,cornpriceinWeifangCity inJan.2011wasUSD308/t, thesame as that in Dec. 2010.

It's believed that cornstarch price will rebound after Chinese Spring Festival. On one hand, the downstream manufacturers have to replenish their stock after the festival, and the demand for cornstarch will increase. On the other hand, owing to the high price of corn, the small cornstarch manufacturers have no much profit against current low price, and some of them even suffer loss.

FIGURE6:CornstarchpriceinChangchun,GuangzhouandWeifangCity,Oct.2010~

Jan. 2011

3 00

3 5 0

4 00

4 5 0

5 00

5 5 0

6 00

1 -Oct

8-Oct

1 5 -Oct

2 2 -Oct

29 -Oct

5 -Nov

1 2 -Nov

1 9 -Nov

26 -Nov

3 -Dec

1 0-Dec

1 7 -Dec

24 -Dec

3 1 -Dec

7 -Ja n

1 4 -Ja n

USD/t

Gu angzhou Ch a n g ch u n Weifa n g


TABLE5: Cornstarch price in some cities, Dec. 2010 ~ Jan. 2011

City ProvinceDec. 17th 2010,

USD/tJan. 17th 2011

USD/tChange rate

Shanghai Shanghai 506 498 -1.5%

Suzhou Jiangsu 511 485 -5.0%

Fuzhou Fujian 511 488 -4.4%

Nanchang Jiangxi 509 491 -3.6%

Wuhan Hubei 511 491 -3.8%

Chengdu Sichuan 511 491 -3.8%

Shenyang Liaoning 461 438 -5.0%

Qinghuangdao Hebei 471 446 -5.4%


CCM’s Market Reports Announcement

For more details, please contact CCM at [email protected]

Future of Modified Starch in Asia Pacific Export summary data of Citric acid in China in 2009Production, Market and Manufacturing Cost of Sugar Alcohols in China

http://www.cnchemicals.com/Report/ReportMin.aspx?rptid=1575







Market & Company Dynamic

DDGSfromtheUSfacesanti-dumpinginvestigationinChina

On Dec. 28th 2010, Ministry of Commerce of the People's Republic

of China (MCPRC) published a note that China decides to run an anti-dumping investigation into Distillers dried grains with solubles (DDGS) originated from the US since Dec. 28th 2010. It's believed that this move may help domestic DDGS industry to some extent.

According to the note published by MCPRC, the investigation period is from July 1st 2009 to June 30th 2010, andthe industry injury investigationperiod is from Jan. 1st 2007 to June 30th 2010. Normally, the investigation maybefinishedonDec.28th2011.

This investigation can date back to Nov. 16th 2010, when Anhui BBCA Biochemical Co., Ltd., Jilin Fuel Alcohol Co., Ltd., Fukang Alcohol Co., Ltd., Jilin New Tianlong Wine Co., Ltd. and other large domestic DDGS manufacturers submitted the application to MCPRC, regarding running anti-dumpinginvestigation into DDGS from the US. And the ministry has decided to carry out the investigation, as DDGS output of the applicants accounts for more than 50% of natioanl total. And it's believed that the imported DDGS hurts domestic industry.

Since 2006, the import volume of DDGShaskeptincreasingsignificantly,with 621 tonnes, 2,153 tonnes, 6,741 tonnes, and 652,166 tonnes in 2006, 2007, 2008 and 2009 separately. Moreover, the number climbed to the peak of 2.9 million tonnes during January and November in 2010. (FIGURE7) Such a large import volume has accounted for about 91% in total output of DDGS in China.

Besides,withsuperiorquality,DDGSf rom the US is more popular in domestic market despite its high price. Price of imported DDGS in Guangdong ProvincewasUSD306/tonDec.31st2010,while ex-factory price of theproduct in Shandong Province was USD226/t. And an insider from aDDGS trading company said that the color of domestic DDGS looks not so good as imported one, and its protein contentmaybeinsufficientsometimes.

However, given the price differential b e c o m e s w i d e r , m a n y f e e d manufacturers may have a stronger willingness to domestic products. Thus,ifChinadoeslevyanti-dumpingduty on imported DDGS from the US, domestic DDGS may get its opportunity with much lower price. "It's hard to estimate the impact on the industry for now, because it depends on the rate

ofanti-dumpingduty tobe imposed.But it is sure that the import volume of DDGSwillreduceifanti-dumpingdutyis levied," said the insider.

SomeexpertsviewthatdomesticDDGSmanufacturers can grab more profit as the product's price will be upraised aftertheanti-dumpingduty is levied.It's predicted that domestic supply of DDGS can't satisfy its demand in 2011, and China needs to import the product. (Corn Products China News 1012, P3) Thus, aided by the undersupply situation and anti-dumping duty,market price of DDGS may be pushed up. However, the undersupply situation may make Chinese government not levytheanti-dumpingdutyfinally,orthe duty may be not so high, as the government must guarantee the healthy development of feed industry.

FIGURE7:ImportvolumeandpriceofDDGS,2009-2010

-

5 0,000

1 00,000

1 5 0,000

2 00,000

2 5 0,000

3 00,000

3 5 0,000

4 00,000

4 5 0,000

5 00,000


Un

it:

ton

ne

-

5 0

1 00

1 5 0

2 00

2 5 0

3 00

3 5 0

4 00

4 5 0

5 00

5 5 0

6 00

Unit:USD/t

Im por t v olu m e 2 009 Im por t v olu m e 2 01 0 Im por t pr ice 2 009 Im por t pr ice 2 01 0

Note: The import volume in January, February, March, and April in 2009 was

2,872 tonnes, 40 tonnes, 1,061 tonnes, and 758 tonnes respectively.




QuantumHigh-Techsucceedsingettinglisted

Dec. 22nd 2010 is the first day for Jiangmen QuantumHigh-Tech

Biochemical Engineering Co. , Ltd. (QuantumHigh-Tech) to get listed inChina's Growth Enterprises Market in Shenzhen StockExchange. By thismove, the company plans to raise funds to expand its fructooligosaccharide(FOS) and galactooligosaccharide (GOS) businesses.

QuantumHigh-Tech expects to raiseUSD25milliontoexpandthecapacityofFOSandGOSby10,000t/aand2,000t/a respectively. As long as the funds are available, their construction will be started, and construction period for both these two production lines is 2 years. Eying the strong prospect of FOS and GOS industries, coupled with current full capacity operation of these two products, thecompanyexpectstograbmoremarketshares and earn fatter profit through this expansion.

According to its prospectus, Quantum High-TechhasexpandeditsFOScapacityfor twice since 2007 (FIGURE8), and itscapacityutilizationcanalwaysreacharound 100%, indicating current capacity can't satisfy the market demand.

Chinese FOS industry will witness rapid growth innext fewyears thanks to thefastdevelopmentofhealth-careproductsand infant formula industry. According to a report fromBeijing LeadershipM a n a g e m e n t C o n s u l t i n g C o . , L t d . (Leadership), a strategic management consultation company in China, 60% FOS waspredicted tobeused inhealth-carefood and milk powder, and 30% in infant formula in 2010. Besides, accompany with higher and higher public's living standard and the tendency of aging population in China, more and more prebiotics are needed. (FOS is a kind of prebiotics.) It's estimated that the sales volume of FOS in China can reach 100,000 tonnes in 2014 while it was 16,000 tonnes in 2009. (FIGURE9)Thus,QuantumHigh-Techbelieves it can earn more profit through expandingthecapacity.

QuantumHigh-Tech, the largest FOS

manufacturerinChina,enjoysadvantagesin these two products. Its FOS products' purity ranges from 50% to 95% with powderandliquidstatus,whilefewothercompanies can produce FOS with the whole purity range. Besides, in 2009, themarket share of QuantumHigh-Tech in Chinese FOS reached about 44%. QuantumHign-Tech'ssalesvolumeoffor

low purity FOS can reach 4,000 tonnes per year, while that of its biggest competitor, namelyYunnanJianshengBio-technologyCo., Ltd., is only 2,500 tonnes per year.

Besides,QuantumHigh-Techhasalargeand stable client to support its good performance, namely Perfect (China) Co., Ltd. (Perfect China), which focuses on

FIGURE8:ProductionsituationofFOSinQuantumHigh-Tech,2007~H12010

-

1 ,000

2 ,000

3 ,000

4 ,000

5 ,000

6 ,000

7 ,000

8 ,000

9 ,000

1 0,000

2 007 2 008 2 009 H1 2 01 0

Un

it:

ton

ne

0%

2 0%

4 0%

6 0%

8 0%

1 00%

1 2 0%

1 4 0%

Ca pa city Ou tpu t Capacity Utiliza t ion

Note: The FOS capacity in H1 2010 is 5,000 tonnes per half year, then after the

technology upgrading, the capacity of FOS in the whole year of 2010 increased to 11,000

tonnes per year.

OutputintheabovementionedfigureiscalculatedbythatoflowpurityFOS,andthe

high purity FOS has converted into low purity FOS.

Source:ProspectusofQuantumHigh-Tech

FIGURE9: Sales volume of FOS in China, 2007 ~ 2014

-

2 0,000

4 0,000

6 0,000

8 0,000

1 00,000

1 2 0,000

2 006 2 007 2 008 2 009 2 01 0(Est .)

2 01 1(Est .)

2 01 2(Est .)

2 01 3(Est .)

2 01 4(Est .)

Un

it: t

onn

e

0%

1 0%

2 0%

3 0%

4 0%

5 0%

6 0%

7 0%

8 0%

9 0%

Sa les v olu m e Gr ow th r a te

Note: The markedly lower growth rate in 2009 is caused by the “melamine scandal” in

2008.

Source:ProspectusofQuantumHigh-Tech



health-carefoodandskincareproducts.InH12010,theturnover from Perfect China accounted for 43% in total turnoverofQuantumHigh-Tech.Andaccompanywiththe increased demand for FOS, the company will keep striving to find more large clients and manage well its customer relationship to grab more market share.

It is worth noting that as FOS supply increases, its price has started to decline since 2008. In H1 2010, the average price of low purity and high purity FOS was USD1,059/tandUSD2,329/t,comparedwithUSD1,224/tandUSD5,010/trespectivelyin2008.

Besides, inhighpurityFOSfield,QuantumHigh-Techloadsrelativelyhighpressure.MeijiCorpandOFAFTICorparethemainexportersofChineseimportedhighpurityFOS,whicharethemajor largecompetitorsforQuantumHigh-Tech.Besides,BaolingbaoBiologyCo.,Ltd. (Baolingbao) plans to launch its high purity FOS productionlinewithcapacityof10,000t/aattheendofJan.2011,whichmaybecomeanothermajorcompetitorfor the company in high purity market of FOS. Currently, China's high purity FOS is mainly depended on imports.

As for the product of GOS, it also has good prospect. It is estimated that GOS demand in China will climb to 6,000tonnes~10,000tonnesinnext2~3years,whilecurrentcapacityofdomesticGOSissmallerthan2,500t/a and sales volume of domestic manufacturers was only 1,500tonnesin2009,thus,greatmarketpotentialexistsinthisfield.

Bytheway,QuantumHigh-Techwillenterhealth-careproducts industry and as reported, the company will try tomergeotherprebioticsmanufacturerstoexpanditsbusiness scale.

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Industrial Biotechnologies China News

Meihua Group's dream of listing comes true

On Dec. 24th 2010, China Securities Regulatory Commission (CSRC)publisheditsapprovalthatWuzhouMinovoCo.,Ltd.

(WuzhouMinovo)mergesMeihuaBiotechnologyGroupCo.,Ltd(Meihua Group) through issuing additional shares of 900 million, whichsignifiesMeihuaGroupsucceedsinBackdoorlisting.

ThemergerofWuzhouMinovoandMeihuaGroupcandatebackto Mar. 2009, and it includes two mutually conditional parts: On onehand,WuzhouMinovosellsitsmostassetstoWuzhouGroup,the largestshareholderofWuzhouMinovobefore,withvalueofUSD37million.Ontheotherhand,WuzhouMinovomergesMeihua Group through issuing 900 million additional shares withvalueofUSD874million.Andafter themerger,WuzhouMinovo will be renamed as Meihua Biotechnology Group Co., Ltd.(New Meihua Group) and at the same time, Meihua group will be revoked its corporate capacity. In addition, the shareholders of Meihua Group totally own 89.27% shares of New Meihua Group,

and the restwillbeheldbyWuzhouGroup (2.19%)and theshareholdersofpublicshareofWuzhouMinovo.(8.54%)

Actually,WuzhouMinovo,a listedcompanyinShanghaiStockExchange,wasengagedinproducingelectricequipmentsbeforemerging, and the company performed not well in 2007 and 2008 withmeagerprofit.Soitexpectstoincreaseitsprofitanddevelopbetterbydintofthetransitionfromelectricequipmentsindustryto fermentationandaminoacid industrywhichenjoygreatprospect as the company believed.

Monosodium glutamate (MSG) industry, an important fermentation industry, is developing well at present. Its average annual growth rate of output during 2004 to 2008 reached 13.6%, and its national total output from Q1 and Q3 in 2010 reached about 1.8 million tonnes, increasing by 17.7% over the corresponding period of 2009. In addition, it's predicted that the

http://www.cnchemicals.com/Newsletter/IndustrialBiotechnologyNews.shtml





total output of MSG in 2010 may reach 2.1 million tonnes.

Moreover, as the government has restrained development of corndeep-processing industry since 2007, alongwith the close attention paid by the government to MSG industry for its high pollution, the number of MSG manufacturers reduced from 200 to about 20, which relaxestheintensecompetitionsituationinthisindustry.Currently, the total output of top 12 manufacturers accounts for about 89% of the national total.

In addition, some leading MSG manufacturers, which also produce glutamic acid (GA) as well, the raw material of MSG, reduce their sales volume of GA and use them to produce MSG by themselves in order to upraise their MSG market share. This move reduces MSG output of some small producers whose GA is sourced from outside. Thus, the industrial concentration becomes higher and higher.

The high industry concentration contributes to high gross profitmarginandmarketpricefortheleadingcompanies.Thesalesgrossprofitmarginofthetoptwomanufacturers,Fufeng Group Limited and Meihua Group, reached 30% and 29% in 2009, while it was 18% and 22% in 2008 respectively.AverageMSGprice isaboutUSD1,360/tcurrently,comparedwithaboutUSD950/tandUSD1,564/t in corresponding period of 2009 and 2010.

Meihua Group is a main producer in MSG industry and

expectstoexpanditsbusinessestoafurtherstepthroughlisting. The MSG's turnover of Meihua Group was about USD574 million and USD598 million in 2008 and 2009 respectively, and its market share during the same period reached 18.1% and 14.6%. (TABLE6)

Afterbeing listed,MeihuaGroupplans to expand itsbusinesses.Right now, the company has an under-constructionproject.Theinvestmentofthefirststageofthisproject(including30,000t/acapacityof threonine,30,000t/acapacityof lysineand160,000t/acapacityofglucose) is USD211 million and it is planned to complete in April2011;thatinthesecondstage(40,000t/athreonine,6,000t/anucleotide,and160,000t/aglucose)isUSD151million and it is planned to start in May 2011 and launch in May 2012. The company also has interest in inosine, vernine, tryptophan, and arginine production in the future.

MeihuaGroupisnot just involvedinMSGindustry,butalso in other amino acid products, such as threonine, cornbyproducts(maizeembryo),andfeed.Besides, thecompany also produces upstream industry products, like ammonia, and it even generates electricity, which makes itenjoyscostadvantage.Atpresent, thecompanyownstwomajorproductionbases,locatedinTongliaoCityandBazhouCityrespectively,withMSGcapacity350,000t/a,threoninecapacity35,000t/a,feedcapacity300,000t/a,cornbyproductscapacity200,000t/a,andammoniacapacity80,000t/a.

TABLE6: Market situation of top 6 manufacturers in MSG industry in China, 2008 ~ 2009

NO Company

Turnover, million USD

Sales volume, tonne Market share, %

2008 2009 2008 2009 2008 2009

1 Fufeng Group Limited 516 676 332,871 661,425 20.1 25.9

2 Meihua Biotechnology Group Co., Ltd. 574 598 369,682 371,614 18.1 14.6

3 Linghua Group Incorporated Company 459 417 151,769 268,675 8.2 10.5

4 Shandong Qilu Monosodium Glutamate Group 264 387 144,624 182,246 12.2 7.1

5 Henan Lianhua Monosodium Glutamate Co., Ltd. 333 362 224,373 287,585 9.0 11.3

6 Xinle Monosodium Glutamate Foods Company 276 314 166,128 191,316 7.8 7.5

Note: The market share is calculated by output.

Source: Meihua Group

CCM’s Coming Market Reports Announcement


Survey of High Intensity Sweeteners in Asia Pacific Future of Oligosaccharide Market in China

http://www.cnchemicals.com/Report/ProposalDetail.aspx?rptid=1503

http://www.cnchemicals.com/Report/ProposalDetail.aspx?rptid=1503




ShanxiHuaronginitiates60,000t/acitricacid

OnDec. 18th2010,ShanxiHuarongCitricacidChemicalsCo.,Ltd.(Shanxi

Huarong) held a foundation stone laying ceremonyof its 60,000t/a anhydrouscitric acidproject (PICTURE1),whichsignifiesthatthecompanybeginstomarchinto China’s citric acid industry.

Located in Dali Science Industrial Park with an area of 22 hectares, the anhydrous c i t r i c a c i d p l a n t m a i n l y p r o d u c e s anhydrous citric acid, compound feed andliquidcarbondioxideproducts,withcapacity of 60,000t/a, 68,000t/a and26,000t/aseparately.Total investmentfor this plant is about USD75 million. Anexecutiveofficer inShanxiHuarongdisclosedthattheprojectcanbeputintooperation at the end of 2011, and it’s estimated that the company can contribute toannualtaxpaymentofUSD8.6million.

It's reported that citric acid production technology in this company is quiteadvanced, which can reduce the corn consumption, energy consumption and water consumption by 13%, 35% and 60% separately per tonne citric acid production, indicating that its manufacturing cost can beaslowasUSD226/t.

Theexecutiveofficeralso revealed thatboth domestic and international markets are the targets for the company's citric acid products. Although some countries levyanti-dumpingandanti-subsidydutiesonChina'scitricacid,ShanxiHuarongstillhasconfidenceintheinternationalmarket,thanks to its huge demand for citric acid. It's reported that the global demand for citric acid is about 1.3 million tonnes, and its annual growth rate will keep at 5% ~ 7% innextfewyears.

''As the largest citric acid production base in the world, China's citric acid

manufacturers may witness an opportunity by dint of the demand increase. And thequalityofouranhydrouscitricacidproductsatisfiesBP93/BP98standardandGB/T8269-1998standard,andIbelievethe product will have a good performance bythen.''saidbytheexecutiveofficer.

However, China's citric acid industry has situated in overcapacity currently, and it's not so easy for the new manufacturers to win their own place in this industry. In 2009, the total domestic capacity of citricacidwasabout1,200,000t/a,andabout 73% of Chinese citric acid was exported.What'sworse,somecountries,like theUSandEU, levyanti-dumpingand anti-subsidy duties on China'scitric acid products, which reduces the profit of manufacturers and restrains

the development of China's citric acid industry.

However, the manufacturers can find the waystocopewiththeanti-dumpingissues,suchasexpandingthemarketwherenoanti-dumpingandanti-subsidydutiesareimposed, entrepot trade, etc. In 2010, the annual growth rate of China's citric acid's exportvolumereached9%,whileitwas2%and 3% in 2009 and 2008 respectively.

Theexecutiveofficer inShanxiHuarongdidn't disclose the company's measures to copewithother'scountries'anti-dumpingissue at present, buthe expressed themarket environment may change after a year since the products in this plant is to be marketed a year later, and the company will make corresponding tactics by then.

PICTURE1:FoundationstonelayingceremonyofShanxiHuarong’sanhydrouscitricacid

project,2010

Source:ShanxiHuarong

http://www.cnchemicals.com/tenth-anniversary.html



Alliance for China's amino acid industry established

Amino Acids Industry Technology Innovation and Strategic Alliance

(the Alliance) was established at the end of 2010, initiated by China Fermentation Industry Association (CFIA). (PICTURE2) And it's believed that the Alliance can bring positive effect on China's amino acid industry.

So far, there are 65 members in the Alliance, which is involved in the manufacture, trade, and research of amino acids and some leading companiesalso join in theAlliance,like Baolingbao Biology Co., Ltd. Actually, only the members in CFIA canjoinintheAlliance,disclosedbyanexecutiveofficer inCFIA.So ifacompany wants to become a member of the Alliance, it has to accede to CFIAfirstly.Thenitshouldsubmitanapplication to the Alliance, and after being approved by the Alliance, the company can become a member of it. Theexecutiveofficeralsosaidthattheapplicant has to be involved in amino acid industry, and foreign company is not restrained.

The Alliance is to facilitate healthy, fast and strong development for China's amino acid industry. Now although there are over hundreds of large amino acid manufacturers in China, whose annual production value totally can reach USD6.76 billion, and their taxpaymentalsocan reach USD0.75 billion per year, the innovation capability of them is poor, especially in the aspect of new technology's R&D, energy saving, environmental protection, etc.

Thus, CFIA and relative government departments try to ameliorate this

situation through establishing the Alliance. The Alliance will be engaged in the following work to play its role in 2011.

F i r s t l y , t o p r o m o t e t e c h n i c a l cooperation and make breakthrough in core technologies. The Alliance will focus on some research of advanced manufacturing technology, like clean andenergy-savingproduction,bio-manufacturing, chromatographic separation, membrane fi ltration technologies. It will also define some standards for this industry and pay closeattentiontotheindustrializationo f s o m e n e w t e c h n o l o g i e s a n d high value-added products, suchas D-amino acid, β-amino acid,nonprotein amino acid, small peptide, etc.

Second ly , t o co - share the newtechnology and information amongst m e m b e r s i n t h e A l l i a n c e , a n d strengthen cooperation with some research institutes, like college and scientific research institution. The Alliance shall fund to support the R & D by research institutes or leading manufacturers, and the new research achievements wi l l be co-sharedamongst members.

Thirdly, to establish a training system for members in order to cultivate talented people in amino acid industry.

Fourthly, tobuildupapre-warningmechanism of amino acid industry risk and ally members to cope with industry risks. And the Alliance will also enhance communication between members,likehighprofilevisit.

PICTURE2: Establishment ceremony of Amino Acids Industry Technology

Innovation and Strategic Alliance, 2010

Source: China Fermentation Industry Association

CCM’s Market Reports Announcement


Production, Market & Benchmarking of Xanthan Gum in ChinaThe Survey of Sorbitol in Asia PacificProduction and Market of Xylitol in China







XiwangFoodtoexpandrefinedcornoilcapacity

On Jan. 5th 2011, Hunan Ginde Development Co., Ltd. (Hunan

Ginde) published a note that its board meeting approved a proposal about expanding150,000t/arefinedcornoil capacity of Xiwang Food Co., Ltd. (XiwangFood),whichisthewholly-owned subsidiary of Hunan Ginde now.Butthisprojectstillneedsthefinalconfirmationinthefirstinterimgeneral meeting of stockholders in 2011. "This project is almostconfirmed because the company needs more capacity to satisfy the market demand in future." said by MissHuang, executive officer inHunan Ginde.

On Dec. 28th 2010, Department of Public Offering Supervision in China Securities Regulatory Commission approved Hunan Ginde to purchase the stock ownership of Xiwang Food. Xiwang Group is the largest shareholder of Hunan Ginde, and it also possesses Xiwang Food, thus, Xiwang Group's corn oil business can finally go public by this way, as Hunan Ginde's corn oil business has gone public.

Actually, corn oil market has strong prospect in the future, and current total capacity in China can't satisfy its potential demand. During 2000 to 2009, the compound annual growth rate of corn oil's output reached over 13%, much higher than average growth rate of 5.6% for other vegetable oils. But according to the data from FoodandAgricultureOrganization,

theoutputofcornoil inChina justaccounted for 1% in total output of majorvegetableoils in2009,whilethe number was 10% in the US. If the proportion can reach 4% in China, the annualdemandforcornoilwilljumpto1milliontonnes,whichexceedsthecurrent capacity much.

T h e r e f o r e , C h i n e s e c o r n o i l manufacturers are taking efforts to expand theirmarket share andincrease brand awareness in order to grab more profit. Xiwang Food is the most active one. The latest move is that Xiwang Food donated about USD52,790 and corn oil valuing USD45,249 to some impoverished children with congenital heart disease on Dec. 23rd 2010, and by this move, corn oil and Xiwang Brand spread more widely. The company also plans to increase its promotion funds to USD38 million in 2011 from USD15 million in 2010. Aided by such a series of efforts, Xiwang Food has created outstanding achievement in 2010,withnetprofitofUSD6millioninthefirsthalfof2010.(TABLE7)

The great market potential and increased sales volume make Xiwang

Food believe that it is high time to expanditscornoilcapacity.Fornow,the company is the largest corn oil manufacturers in China with capacity ofrefinedcornoilandsmall-packagecorn oil of about 200,000t/a and150,000t/a respectively.Andaftertheexpansionproject iscompleted,XiwangFoodwill own350,000t/a refined corn oil capacity. And it's believed that Xiwang Food will also expand the capacity of its small-package corn oil, since small packaged oil,themajorproductofthecompany,enjoyshighprofitmarginandstrongmarket potential.

Besides, the company expects toachieve 100,000 tonnes and 150,000 tonnes sales volume for its small-package corn oil respectively in 2011 and 2012. It believes its brand "Xiwang"canexceedArawanaandFortune to become the top 1 brand in Chinese corn oil market in 2011. And some institutes estimate Xiwang Food'sprofitcanreachUSD27millionand USD38 million in 2011 and 2012 respectively.

TABLE7: Performance of Xiwang Food, 2008~H1 2010Sales volume, tonne

Turnover, million USD

Net profit, million USD

Corn oil in bulk

small-package corn oil

2008 75,800 4,400 140 6

2009 64,600 17,900 148 11

H1 2010 29,100 17,300 74 6


Competitiveness

Sucrose price or to keep uptrend in near future

AveragesucrosepricewentuptrendtoUSD1,086/tonJan.13th2011fromUSD1,056/tonNov.25th2010.(FIGURE10)ThequotationofsucroseinNanningCity,WuhanCityandNingboCitywasaboutUSD1,054/t,USD1,088/t,and

USD1,085/tseparately.It'spredictedthatitwillmaintainthisuptrendinnearfutureandstayatahighlevelin2011,aided by the following factors.



During November 2010 and April 2011(2010/2011),supplyanddemandgap of sucrose in China may reach 2 million tonnes, which will drive up its price. According to the data published on Jan. 7th 2011 by China Sugar Association (CSA), the total output ofsucrosein2010/2011isestimatedto reach 12 million tonnes, while the sales volume is predicted to be 14 million tonnes.

Fast development of its downstream industries increased its demand. It's estimated that the output of biscuit, cake and beverage have increased by about 38%, 40% and 26% separately in 2010 over 2009, thus the demand for sucrose may increase by 10% correspondingly.

Owingtothedrought inGuangxi in2010, the most important sucrose production base in China, the sugar contentinsugarcaneinGuangxiwaslow, which also affects the output of sucrose. In previous year, 10 tonnes sugarcane can produce 1 tonne sucrose,butin2010/2011,itneeds12tonnes sugarcane. The total output in the last two months in 2010 all over the country was only 2.94 million tonnes, which is lower than 3.09 million tonnes in the corresponding period of 2009.

Besides, the freezingweather inGuangxiProvincerecentlyalsohasnegative impact on sugarcane's output inthenextproductionperiod.UntilJan. 9th 2011, the affected area of sugarcaneinGuangxitotallyreached130,000 hectares, which makes the public worry about its output in the future, thus driving up its price.

However, there is still good news to hold down the price. It is predicted thatIndiawillexportabout1milliontonnes sucrose during Nov. 2010 to Oct.2011,andbecomeanetexporterof sucrose during this period, thanks to the sugarcane harvest in this country. And global output of sucrose during Nov. 2010 and Oct. 2011 is

predicted to reach 170 million tonnes, up 7.3% over the corresponding time of 2009-2010 and its globalconsumptionwilljustincreaseby2%to 167 million tonnes, so sucrose has a slight surplus in the world, which can hold down its international price.

In general, sucrose price in China may still run at a high level in 2011, and it will drive up the prices of its substitutes, like high fructose corn syrup (HFCS), and Glucose Monohydrate, whose average prices in Jan. 2011 reached USD475/t (Content: 42%) andUSD550/trespectively, up 2.1% and 1.8% over Dec. 2010.

FIGURE10: Sucrose price in China, Nov. 2010 ~ Jan. 2011

1 ,000

1 ,02 0

1 ,04 0

1 ,06 0

1 ,08 0

1 ,1 00

1 ,1 2 0

1 ,1 4 0

1 -Nov

8-Nov

1 5 -Nov

2 2 -Nov

29 -Nov

6 -Dec

1 3 -Dec

20-Dec

2 7 -Dec

3 -Ja n

1 0-Ja n

Unit:USD/t


Corn Supply

Analysis into China's corn market in 2011

It'swellknownthatcornpriceinChinahaskeptascendingin2010,whichwasUSD283/tonJan.1st2010inShandongProvince,whileitclimbedtoUSD308/tonDec.31st2010.Entering2011,thepriceofcorn,keyrawmaterialofcorn

products, will be still the spotlight. Thus it's necessary to predict how corn market will go in 2011. As CCM predicted, corn price may maintain current high level due to its undersupply situation.

The demand for corn in 2011 will keep increasing. Feed industry, the largest consuming sector of corn, is developing well and fast, and it needs more corn in 2011. It's estimated that over 160 million tonnes corn were consumed by feed industry, increasing by 7% over 2009. If calculated by this development rate, feed industry will consume over 1.7 million tonnes corn in 2011.

Cornconsumptionincorndeep-processingindustryalsowill increasein2011.China'sfoodindustryhasreboundedfromfinancialcrisisandmelaminescandaloccurredin2008,sothedemandforsomecornproducts,likestarch,starchsugar, sugar alcohol, has also increased in 2010, and it will keep this increasing trend in 2011. Actually in 2010, the corn consumptionindeep-processingindustrywasestimatedatabout43milliontonnes,up8%over2009.In2011,itmay



reach 46 million tonnes if calculated by this development rate.

Chinaneedstoreplenishthenationalcornstock.Inordertoincreasecornsupplyandstabilizeitsprice,Chinabegantoauction national temporarily reserved corn in April 2010, and the total transaction volume until Dec. 28th 2010 reached 14.5milliontonnesin2010.Besides,totaltransactionvolumeinnationaltrans-provinceauctionin2010reached10.7milliontonnes.What'smore,aquantityofcorninnationaltemporaryreservesauctionedhassourcedfromnationalreserve since June 11th 2010. It's reported that the national corn reserves remains not too much, and it needs to be replenished in 2011 in order to guarantee the national food security.

However, rich harvest in 2010 is good news to drive down the price. It's predicted that corn yield in 2010 may reach 158~168 million tonnes, increasing by 2% ~ 8% over last year. But, it still can not satisfy the demand in 2011. Hence, the governmentispredictedtotakethefollowingmeasurestostabilizecornprice.

First, the possibility of the government to implement the national corn temporary reserve policy in 2011 is slim. The purpose of the government to implement this policy in last two years was to protect the interest of farms as corn price at that time was too low, and since corn price in 2011 is obviously high and farms' interest can be guaranteed, it has little necessity to adopt this policy.

Second, thedevelopmentofcorndeep-processing industrywill stillbe restrained in2011.Chinesegovernmenttakes healthy development of feed industry as a priority; thus, take current undersupply situation into account, corn consumption in corn deep processing industry will be limited.

Third, China will increase the import volume of corn in 2011. Until November, the total import volume of corn in 2010 hasalreadyreachedabout1.6milliontonnes,andit'sestimatedthatthenumberin2011mayexceedit.

Besides, thegovernmentwillalsoreleasesomepolicies tostabilizecornprice,suchasencouragingcornplanting,reducing the cost in the whole supply chain. And although China's money and credit policy in 2011 is "Prudent", rather than "Moderately loose" in 2010, the credit for agricultural products is not so tight in order to ensure agricultural products supply.

New Technology & New Products & R&D

Newenergy-efficientfermentationbiotechnologypromoted

A newenergy-efficient fermentationbiotechnologyis l isted in "List of energy-saving technologypromoted by the Nation (the List)", published by National Development and Reform Commission (NDRC) at the end of Nov. 2010. The List includes 30 new energy saving technologies involving in 11 industries, such as chemical, biotechnology, etc.

The new fermentation biotechnology can reduce 20% of energy consumption, and is cost-effective for themanufacturers. It includes twomajorparts.The firstpart is new air compression of refrigeration technology. In the refrigeration procedure of fermentation, the new technology is to use compressed air as refrigerant. When the compressed air released, its temperature around will decrease to 110 centigrade degree from 180 centigrade degree.Andatthemeantime,quantitiesofheatwillbereleased when compressing air, and this heat can be used to dry the fungus dreg, instead of using steam. Thus, water

and energy consumption are saved.

Thesecondpartistousecompressedairtomixmaterialfluid in fermentation, insteadofmechanicalmixer.Adraft tube will be set in the fermentation tank, and the compressed air will enter the tank from bottom. By dint of thepressureofcompressedair,thefermentationliquorinthedrafttubewillbepushedtoflowfromlowertoupper,andaftertheliquorreachesthetopofthetube,itwillflowto the bottom in the space between the tube and tank, and then keeps being pushed up again. This cycle can make the liquorbemixedperfectly,andsavesenergy,besides,italsocan lower down the possibility of infecting bacteria.

Take800steresfermentationtankforexample,thisnewfermentation biotechnology can save 170 steres water per day, and steam consumption can reduce to 292 tonnes from 320 tonnes per tank, and power consumption also can reduce to 19,391kwh from 29,593kwh per tank, and the



refrigerating time can reduce to 3.5 hours from 18 hours.

Thus, if this new fermentation biotechnology can be applied in 60% of the fermentation industry, it can save energyof1.2milliontce(tonofstandardcoalequivalent)each year. It's predicted that the total energy consumption in fermentation industry all over the country can reach 25 million tce, and the energy consumption in the fermentation procedure will account for 40% of the total. And this new fermentation biotechnology can reduce the

energy consumption to 0.8 tce from 1 tce in one tonne product. Moreover, it not only helps the manufacturers reduce their manufacturing cost, but also win some preferential treatment from the government.

Since this new technology is being greatly promoted by the government, if manufacturers adopt it, they may enjoymorepreferentials fromthegovernment, like taxpreference.


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