Vanillin Development Faces Potential Risks    

Vanillin is an important food flavoring and scent, giving off a rich perfume and keeping a sweet smell locked in as well. It is widely used in industries such as food-stuffs, cosmetics, tobacco, medicines and feed additives.
   China has more than 10 factories producing vanillin, including the assistant factory of Jilin Petrochemical Company, Zhejing Jiaxing Zhonghua Chemical Co., Ruohai Fine Chemical Company (JV of Rhodia & Zhejing Xuebao), Henan Gongyi Xuelian Perfume Company Ltd. and the like. Altogether, the production capacity of vanillin exceeds 16 000 t/a. Processing is mainly based on guaiacol-nitrosylation.
    In recent years, the domestic consumption of vanillin has increased steadily. Beginning from 2006, the market price has been climbing quickly, presently the price is on the rise to RMB125 000 - 130 000/t, with the maximum profit even reaching RMB50 000/t, bringing the producers a heavy profit. Since there is a brisk market for vanillin, some projects just under construction and some, projected to be launched are all steadily under way. For example, Anhui Bayi Chemical Industry Company Ltd. (3 000 t/a under tender offering), Jilin Petrochemical Company (4 000 t/a for the second phase, prepared to inaugurate). Hebei Qingxian Tianyuan Industry Co., Ltd. (2 000 t/a under construction), Liaoning Shixing Pharmaceutical & Chemical Co., Ltd. (2 000 t/a under construction), Henan Nanyang Wuke Bio-chemicals Co., Ltd. (5 000 t/a beginning to call for tender in September this year), Henan Gongyi Xuelian Perfume Company Ltd. (400 t/a ready to invite tender) etc. New additional capacity of vanillin of 17 000 t/a would be added by these projects. A possible capacity of 35 000 t/a of vanillin is estimated to reach by the end of 2008.
    To date, China has been a large exporter of vanillin, with 65% of its output being exported. In 2006, China exported 7 500 tons of vanillin, 1 150 tons more than in 2005. The successive expansion of production is sure to consolidate its market position worldwide. But at same time the industry is confronted with some pressures brought about from environmental protection, export policy and surplus vanillin producing capacity.

A. Increasing pressure for environmental protection year by year, hard for enterprises to accommodate

There are some synthesis methods for vanillin according to its raw materials but the dominant means of synthesis is via guaiacol, which can again be classified into two -  nitrosylation and glyoxylic acid synthesis. The latter is obviously better than the former, for example, less of wastes left, ease of post-treatment, with the yield of vanillin reaching 70% - unlike the former, which if used would result in grave pollution to the surrounding environment that is not easily rectified. A large part of factories that adopt the nitrosylation technique get a yield of only 60% of vanillin. With the increasing efforts and strength exerted on environmental protection, some relatively backward vanillin units technically have been ordered to shut down. In June 2006 Jilin Petrochemical Company shut down and dismantled its 1 500 t/a vanillin producing unit.

B. Drop of export tax rebate bringing a negative impact on exports

The Chinese government is imposing new pressure to limit export of chemicals that consume great quantities of energy or other key resources or are highly polluting in production. Vanillin was not on the July list of chemicals that lost the benefit tax rebates for export, but that will not necessarily hold true in the future. Therefore vanillin producers that depend on export should develop alternative channels.

C. Facing a grave surplus, vanillin producers should work to expand areas of vanillin consumption

As newly built production units come on-stream one after another, the domestic production capacity is increasing by a big margin, and supply outstripping demand would be strongly felt. Therefore it is urgent to expand its domestic consumption with economic growth points. Domestically vanillin is mainly used in food additives (50%), medical intermediates (32%), feed regulator (10%) and cosmetics (8%). Consumption is relatively steady. The development space in the medical intermediates sector becomes bigger and bigger, and here local vanillin manufacturers might well be able to extend its application fields.

Current Vanillin Producers in China        t/a
Anhui Bayi Chemical Industry Co.        5 000
Zhejiang Jiaxing Zhonghua Chemical Co.     5 000
Assistant Factory of Jilin Petrochemical Company    2 200
Ruohai Fine Chemical Company            1 500
Henan Gongyi Xuelian Perfume Co.        500
Shenyang Fine Chemical Factory          500
Source: CNCIC