Growth of Citric Acid Export to Slow      

On May 6th, 2008 the United States announced that it will launch a dumping and subsidy investigation into citric acid and citrates (HS codes: 29181400, 29181510 and 29181550) originating from China. It is the second time the citric acid producers in China met with a dumping investigation launched by the United States. According to experts, the worldwide antidumping actions against domestic citric acid producers, the increasing prices of raw materials and the appreciation of Renminbi with respect to U.S. dollars, will all cause the exports of citric acid to fall in 2008, with export growth slowing.
   Exports of Shandong Luxin High-Tech Industry Co., Ltd. (SH: 600783) and Xinjiang Tianye Co., Ltd. (SH: 600075) may fall by the dumping investigation this time.
   BBCA Biochemical Co., Ltd. (SZ: 000930) is a leading citric acid producer in China. According to executives from the company, the dumping investigation this time will have no great impact on the performance of the company. The company will respond to the investigation and increase the prices of its products to guarantee a proper operating profit. It will also expand the domestic market shares of its products to offset the possible impact from fluctuations in the international market.
   In the past ten years or so, the citric acid producers in China have met dumping investigations launched by eight countries, including Turkey (1996), the United States (2000), Thailand (2003), Ukraine (2003), Greece (2003), the Czech Republic (2004) and the South Africa (2007). (CCR2007, No. 4 and No. 31)
   On September 4th, 2007 the European Union also launched a dumping investigation into citric acid and citrates from four Chinese producers including BBCA Biochemical Co., Ltd. Field surveys have already been completed, but the final ruling has not yet been published. (CCR2007, No. 26)
   The citric acid capacity of BBCA Biochemical has reached 220 000 t/a. Both the output and the market share hold the first place in Asia. Around 40% of the citric acid produced by the company is exported to the European Union and around 7% is exported to the United States. The revenue from citric acid business accounted for 26.5% of the total main-business revenue in 2007, second only to the fuel alcohol business of 46.1%.
   Citric acid is mainly used as an additive for foods, medicines and chemicals. There are nearly a hundred citric acid producers in China today with a total capacity of around 500 000 t/a. China is the leading citric acid producer and exporter in the world. The output of citric acid in China was 760 000 tons in 2007 and the amount exported was 708 300 tons, accounting for over 90% of the total output.
   The sustained price rise of grain, coal and sulfuric acid since 2007 has led to cost increases for citric acid producers. The export price of citric acid is rising. The FOB price of anhydrous citric acid already reached more than US$950 per ton at the end of 2007. The gross profit rate of citric acid business in BBCA Biochemical dropped from 14.34% in 2006 to only 0.97% in 2007.
   The price difference between citric acid produced in China and citric acid produced in the United States has reduced from around US$80 per ton in the past to around US$20 per ton today. Analysts expect that the market share growth of Chinese citric acid in the United States will shrink in 2008.