CCM: Marked ups and downs in market price of MSG 03-21-2016

Since Aug. 2015, China’s market price of MSG has recorded slumps mainly because of financial and inventory pressure on manufacturers, dropping raw material price and markedly increasing operating rate of manufacturers.


In H2 2015, China’s market price of MSG suffers large ups and downs, which hit the highest of recent 3 years in Aug. Nevertheless, after 4 months, the price hits a record low of recent 3 years. Frequent fluctuations in the price trouble downstream purchasers. According to CCM research, the price started to rise in mid-April. And then hit a record high of recent 3 years in Aug., being USD1,441.91/t (RMB8,820/t). After that, the price dropped rapidly, being USD1,094.21/t (RMB7,000/t) in Dec., down 24.11% compared to Aug.


                                                China's market price of MSG (40 meshes) in Jan. 2013-Dec. 2015


Source: CCM


It is known that the declining market price is mainly ascribed to 3 factors.


1. Financial and inventory pressure
Since the price was too high before, downstream purchaser generally hold wait-and-see attitude, resulting in limited actual transaction volume. As the inventory increases, manufacturers tentatively reduce the price to ensure the normal turnover of capital and inventory.


2. Dropping price of raw material
Currently, China’s market price of corn (raw material of MSG) is significantly lower than that of last year. MSG manufacturers enjoy large profit space.


In Dec. 2015, China’s market price of corn is USD297/t (RMB1,900/t), down 19.07% year on year, sourced from CCM. Based on the cost scheme, producing one tonne of MSG needs the costs of 2.5 tonnes of corn, 2.5 tonnes of coal, 0.4 tonne of liquid ammonia and 0.5 tonne of sulfuric acid as well as USD93.79 (RMB600) of incidental expenses, the average profit of MSG manufacturers is about USD78.16/t (RMB500/t) in Dec. While the profit was USD250.11/t (RMB1,600/t) in Aug. With huge profit margin, manufacturers have more room to reduce the price when facing inventory pressure.


3. Obviously increasing operating rate
Although China’s MSG market is dominated by Meihua Holdings Group Co., Ltd., Fufeng Group Co., Ltd. and Ningxia EPPEN Biotech Co., Ltd., the market competition is increasingly fierce because more and more manufacturers resume production attracted by the high profit margin. The operating rate of the industry is rising generally.




Daily output and operating rate of China's major MSG producers on 14-18 Dec., 2015

Enterprise

Daily output, tonne

Operating rate

Tongliao Meihua Bio-Tech Co., Ltd.

                  1,150

87%

Fufeng Group Co., Ltd. (Zhalantun Plant)

                  1,100

77%

Fufeng Group Co., Ltd. (Hohhot Plant)

                    850

84%

Ningxia EPPEN Biotech Co., Ltd.

                    550

83%

Shandong Linghua MSG Incorporated Co., Ltd.

                    300

90%

Xinjiang Meihua Amino Acid Co., Ltd.

                    300

90%

Baoji Fufeng Biotechnologies Co., Ltd.

                    300

60%

COFCO Biochemical (Anhui) Co., Ltd.

                    300

90%

Shandong Sanjiu  MSG Co., Ltd.

                    250

94%

Fujian Jianyang Wuyi MSG Co., Ltd.

                    250

93%

Zhuhai Yili Group Co., Ltd.

                    100

50%

Source: CCM

 

Entering Dec. 2015, downstream food producers usually will launch replenishment, processing, production, sales and transportation in advance to welcome the Chinese New Year’s Day and Spring Festival. It will be the peak for downstream purchasing in China. What’s more, in Nov., the average export price of MSG was USD1,177.23/t, over USD50/t higher than the domestic market price. Manufacturers still have high enthusiasm for import. These will increase the demand of downstream market. However, it is predicted that the market supply would not be tight as last year since the relatively high operating rate of domestic manufacturers in early period increased the inventory.


Judging from the above circumstances, it is forecasted that the total output of MSG will record a YoY rise of 9% in 2015, being 1.95 million tonnes.


For the export, thanks to China’s increasing export rebate rate of MSG (HS code: 21039010) to 13%, manufacturers have high enthusiasm for export. It is estimated that the export volume of MSG will total 420,000 tonnes, a proportion of 22%, up slightly compared to 2014.

 



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.

 

We will attend FIC in this week. If you would like to meet us for consultancy in FIC, please get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.


Tag: MSG 

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