China's corn starch
industry has developed rapidly in recent years, a trend that is continuing in
2018. On May 28, the China Starch Industry Association analysed China's corn
starch industry on its geographic distribution of capacity, market
concentration, and annual output. As shown, Shandong Province was the largest
domestic corn starch producing area and the country hit a record high in output
last year.
According
to CCM’s research, the country's corn starch capacity was as big as 40 million
t/a in 2017. Following the current trend, the production capacity is very
likely to continue the growing trend in 2018. China implemented the subsidy
policy for corn in previous years to make use of the large corn reserves the
country has gathered in the last decades. Higher profits from corn starch have
motivated enterprises to build and expand corn starch production lines.
In
2017, north China, central Henan Province, northern Anhui Province, northeast
and northwest China were the most concentrated corn starch capacity regions and
main corn producing areas. Materials supplies were sufficient and costs were
low there that deep processors could increase production of moist grains.
Shandong
Province was still the largest cornstarch manufacturing region in China. As
Heilongjiang Jinxiang and Eppen Biotech have rapidly improved their capacity,
Heilongjiang Province and Ningxia Autonomous Region's corn starch outputs both
surpassed 1 million tonnes. Total outputs of Shandong, Hebei, Jilin,
Heilongjiang, Shaanxi, Henan provinces and Ningxia Autonomous Region were 95%
of the country's yields, according to market intelligence firm CCM.
Some
large-scale deep processors have built relatively complete intensive processing
industrial chains and thus held high market shares last year. This indicates
China's relatively high capacity concentration.
According
to data, 41 producers respectively manufactured over 100,000 tonnes
of cornstarch, 25.50 million tonnes in total and 98% of domestic gross
outputs. Zhucheng Xingmao is the biggest one, with an output of 3.41 million
tonnes and 13.1% market shares. COFCO, Xiwang Group and Shandong Shouguang
respectively manufactured 2 million tonnes, 1.60 million tonnes, and 1.57
million tonnes of cornstarch, with markets shares of 7.7%, 6.2%, and 6.1%.
Price development
China’s
national policy mainly affected corn's price during March and May 2018. The
Ministry of Commerce of the People's Republic of China imposed tariffs on farm
products like soybean, corn, and sorghum imported from the USA on April 4. Then
on April 12, China launched a bidding sale of temporary corn storage.
If
the Sino-US trade war has been further eased, corn price may decline. Corn
stored by deep processors in Northeast China was completely consumed, which
sharply dropped processing profit. Price of international cassava starch
skyrocketed because of reduction of Southeast Asian producers, resulting in a
great increase in domestic corn starch exports. Export volume of cornstarch is
expected to remain stable. Currently, domestic starch companies have high
operating rates and sufficient supply. It is predicted that price of cornstarch
will remain steady with fluctuations.
Demands
for sugar, paper, and food are sluggish, thus spot price of cornstarch will
hardly increase in a short period, but it will remain steady with stable cost.
Thus spot price of cornstarch may remain stable rather than fall down.
Over
a half of demands for cornstarch are from starch sugar. However, consumption of
starch sugar only maintained a slight growth this year because its price
difference with sugar shrank and sugary drinks were no longer popular with the
young. Exports of fructose obviously fell because of increased import tariffs.
As predicted, China's fructose export volume will sharply decline in 2018,
leading to domestic oversupply.
China’s corn starch
industry
As
one of the most important sectors of the corn deep processing industry in
China, corn starch industry saw a healthy development in recent years, shown by
the significant increase in output and export volume.
The
cornstarch cost decreased along with falling corn prices. It is a fact, that
the highest cost factor of corn deep processing is the raw material cost for
corn. When the corn price drops in the market, the cost of sales for corn
deep-processing enterprises falls alongside.
Another
decisive factor can be seen in governmental subsidies. In November 2016, the
Chinese Government announced that the qualified corn deep processing
enterprises in some selected provinces would receive subsidies from the
government for the corn purchased. Those beneficial subsidies are encouraging
many manufacturers to use the full potential of their corn starch production
lines.
Many
market players experienced a much better export performance for their products
in 2016. China's export volume of cornstarch increased to a high degree, mainly
owing to the further drop and better advantage in corn price. The prices of
domestic corn and cornstarch shared almost the same changing trend.
Most
of the cornstarch in China is consumed by the domestic market, despite its
larger export volume, with the biggest share taken up by starch sugar
processing. According to official statistics, 60.71% and 6.19% of the domestic
corn starch were used to produce starch sugar and modified starch respectively
in 2016.
About the article
The
information for this article comes from CCM, China’s leading market
intelligence provider for the fields of agriculture, chemicals, food and feed.
Get
regular and exclusive insights into China’s corn products market by subscribing
to CCM’s monthly published Corn Products China News.
Join
the discussion in our groups on LinkedIn and Facebook.
Follow
CCM on Twitter: @CC_Kcomber.