Glutamic Acid Retains Bright Market Prospect    

The Chinese Government issued a new export rebate policy in July this year. The export rebate rate for APIs such as amino acids, sulfonamides and plant extracts is down from 13% to 5%. The export rebate rate for glutamic acid was eliminated. Such a change has produced huge shock and great concern in the glutamic acid sector.

Rapid output increase

Glutamic acid is one of amino acids. The production of glutamic acid in China can be traced back to the early 1920s.
    With the maturing of the fermentation process, the output of glutamic acid in China has increased rapidly. The output was only 600 tons in the early 1950s but rose sharply to 6 000 tons in 1960. The total output was already close to 80 000 tons in the 1980s. It increased to 650 000 tons in the mid-1990s and was more than 1.0 million tons in 2000. According to statistics, the total output of glutamic acid reached 1.19 million tons in 2006.

Drastic export growth in 2006

Over several decades of constant competition in the domestic market, the number of glutamic acid producers in China was reduced from 200-300 in the early 1980s to little more than 80 in 2006. Major producers now include Henan Lianhua Monosodium Glutamate Company Ltd., Shandong Linghua Group, Shandong Xuehua Co., Ltd., Shenyang Hongmei Corporation, Jiangsu Chrysanthemum Group. and Hebei Meihua Group.
   The total output of sodium glutamate in China was more than 1.7 million tons in 2006, an increase of around 24% over 2005. The total sales revenue for glutamic acid and salts was as high as RMB17.79 billion and the profit was RMB1.26 billion. The profits of various producers increased overall and the number of losing enterprises was reduced. As glutamic acid producers in China paid greater attention to quality control, the export amount of glutamic acid and salts grew constantly. China exported 207 000 tons in 2006, an increase of 149% over the previous year. The export price of sodium glutamate was US$907.6 per ton, an increase of 3.5%. The export amount of glutamic acid and salts reached 125 000 tons during January-June 2007, an increase of 26.8% over the same period last year. Due to the impact of the export rebate readjustment, the exported amount of sodium glutamate dropped in July this year.
   As glutamic acid produced by Henan Lianhua Monosodium Glutamate Company Ltd. has passed the multi-nation quality certification in Europe, its price is slightly higher than the price of products in other domestic producers.

Cost reduction - development trend of the sector

Sodium glutamate has without a doubt become the variety of amino acids with the biggest sales volume in the world. Its global market growth rate is 4% and the development prospect is therefore bright. Except for a few producers in the south of China using sugarcane molasses as raw material, most glutamic acid producers in China still use the corn starch fermentation process. The price of corn starch has increased rapidly in recent years. As corn starch has become an important raw material for feed and "bio-gasoline", it is in short supply in the market. Use of low-cost sugarcane molasses as the key raw material to produce glutamic acid should become a development trend in China.
   If glutamic acid producers in China intend to keep their share of the international market after the elimination of the export rebate, they must first of all reduce production costs. At first glance the prospects for exporting glutamic acid from China seem to be dim, but experts think that the market performance of glutamic acid and salts in China will still be bright in the next few years.
   According to estimates made by experts, the per-capita consumption of glutamic acid for residents of the mainland China is only 769 gram, not even one-third of the per-capita consumption for residents of Taiwan province, Hong Kong and Macau. With the rapid development of the national economy and the constant improvement of the living standard in the central and western regions of China, the demand for glutamic acid in the domestic market will grow rapidly in the future.