citric acid price in China rocketed in Q2 2016

Main factors boosting the domestic citric acid price are:

1. Short supply of corn (raw material for citric acid)

Most of high-quality corn was purchased for temporary storage, resulting in short market supply. Therefore, enterprises raised purchase price. In June, the purchase price of corn raised by some citric acid factories in Weifang City, Shandong Province was USD294.75/t (RMB1,960/t), up 11% MoM.

2. The improving downstream demand

At present, China’s citric acid is mainly used as additives in beverage and food. As summer comes, the demand for beverage improves, which boosts the demand for citric acid.

3. Enterprise suspending production reduces the market supply

COFCO Biochemical (Anhui) Co., Ltd., a leading citric acid enterprise in China, still suspends citric acid production in its Bengbu Factory for relocation. So the overall citric acid supply maintains low in China, pushing up the price.

The domestic citric acid market is still in overcapacity. According to CCM’s research, the production capacity of citric acid is about 1.67 million t/a in China in 2015. However, the total output was only 987,000 tonnes.

What’s more, after raising purchase price of corn for more than a month, enterprises’ inventories are sufficient, which can satisfy their needs. As a result, price will stabilize in the short term. Furthermore, in the near future, corn supply will be sufficient as the state’s inventories and new-harvested corn flow into the market. At that time, corn price will drop and drag down the citric acid price.

It should be noted that China’s citric acid relies on export heavily. Export volume of citric acid (HS code: 29181400) accounts for about 72% of the total output. According to China Customs, export volume was 83,135 tonnes in May 2016, up 13.2% YoY and 23.7% MoM. Meantime, export price also hit a record low since 2014 – USD703.33/t, down 12.3% YoY and 1.2% MoM.

The export destinations of citric acid from China are shifting from developed countries to developing countries. Data from China Customs show that the top three destinations were India, Mexico and Turkey in Jan.-May 2016. Affected by anti-dumping investigation, China exports less citric acid to the European Union and the US. The latter even dropped out of the top 20. Fortunately, the strengthening demand from developing countries opens up new export markets for China.

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. CCM is a brand of Kcomber Inc.