February 5, 2004

Global Bio-chem Expects Lysine Demand To Drop On Bird Flu

Global Bio-chem Technology Group Co., the world's third-largest lysine producer, said on Wednesday it expects the average price of lysine this year to range between 20,000 yuan and 22,000 yuan (US$1=CNY8.28) per ton, compared with an average of HK$20,000 last year.

The price of lysine hit a high of CNY50,000 per ton in late October amid a global shortage, up from an average of CNY17,000 per ton in the first half, analysts said earlier. The price has since softened to about CNY25,000 per ton.

Global Bio- chem's chairman, Liu Xiaoming said the company's lysine exports could rise to 20,000 tons this year from 4,000 to 5,000 tons last year as it is negotiating large orders from a big client.

"We're still in talks on the volume they will buy from us," said Liu.

Liu said up to now, the price of lysine hasn't been influenced by the bird flu outbreak currently sweeping Asian countries, but he expects lysine demand to drop in the short term.

Some 80% of Global Bio-chem's lysine is sold to the animal husbandry industry, though of that amount only 20% is sold to the poultry sector.

"As the supply of poultry products decreases, demand for meat like beef and pork will increase and drive up demand for pig and cattle feed...hence the impact on lysine should (turn out to) be a positive one," Liu said.

He added the bird flu outbreak also hasn't affected the price and sales volume of another of the company's products, corn gluten. About 80% of Global Bio- chem's corn gluten sales is used in poultry feed. The product accounts for only 8% of the company's total sales and about 5% of its profit, Liu said.