CCM: HFCS to increasingly substitute white sugar in Q1 2016 03-24-2016

In Q4 2015, China’s HFCS price decreased whilst the white sugar price increased, causing the growth of HFCS used in downstream food and beverage industries. It is expected that in Q1 2016, this market trend will continue, beneficial to the development of domestic HFCS enterprises.


In Q4 2015, China’s high fructose corn syrup (HFCS) decreased continuously, whilst the white sugar price increased constantly, according to CCM’s price monitoring. For instance:

  • Ÿ   F55 HFCS: market price averaged USD438/t (RMB2,800 t/a), down by nearly 8% over that of USD492/t (RMB3,150/t) in Q3
  • Ÿ   White sugar: market price at USD828/t (RMB5,300/t) on average, up by 4% over that of USD797/t (RMB5,100/t) in Q3


Such opposite tendencies led to the gradually enlarged price gap between HFCS and white sugar, showing the advantages to replace white sugar with HFCS. “The equilibrium line of white sugar/HFCS price ratio is around 1.3-1.4”, an industry insider commented to CCM: “Now the price ratio has reached about 1.9, the highest level this year. This indicates that HFCS boasts stronger price advantage than white sugar, beneficial to the HFCS-white sugar substitution”.


In fact, the downstream food and beverage enterprises have already begun to expand the application of HFCS. For instance, The Coca-Cola Company (Coca-Cola) increased the use of HFCS from 80% to 85% in its production in Q4.




In Q1 2016, the trend that the HFCS price decreases and the white sugar price increases will continue in China. The price gap is expected to reach USD469/t (RMB3,000/t) at least.


- F55 HFCS: impacted by the sufficient supply of corn, the price of corn starch will show a downturn in Q1. In view of the price trend of corn starch 1605 futures contract from the Dalian Commodity Exchange, the futures price of corn starch will be lower than USD312/t (RMB2,000/t), to pull down the production cost for producing F55 HFCS to be less than USD352/t (RMB2,250/t). Under this, the price of F55 HFCS will fall to USD375-391/t (RMB2,400-2,500/t).


- White sugar: as the production of sugar will be cut down in 2015/16 extracting season (October 2015-September 2016), the sugar price will be easy to rise instead of fall. “In 2016, the minimum price of white sugar will reach USD844/t (RMB5,400/t)”, predicted an industry insider.


This is beneficial to the Chinese HFCS enterprises.


- Production profit for HFCS. With a presupposition that the corn price will decline in early 2016, the profit from producing F55 HFCS can stay at about USD23-39/t (RMB150-250/t) roughly, even when the price of F55 HFCS is USD375-391/t (RMB2,400-2,500/t).


- Demand for HFCS. Accordingly, Coca-Cola has a plan to continuously increase the use of HFCS to about 95%, expected to strengthen the demand for HFCS by about 100,000-150,000 tonnes. In other fields, such as the preserved fruits and pastries and puddings with high sugar content, it is of great possibility to raise the use of HFCS.


If the downstream food and beverage industries increase the demand for HFCS, it will push up the HFCS output, to ease the overcapacity in China. In 2015, the production capacity is around 6.20 million t/a. However, the output is about 3.30 million tonnes, capacity utilisation rate at only 53%.



 


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.


Tag: HFCS



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