June 1, 2007

 

China Global Bio-Chem raises lysine prices 12 percent

 

 

Global Bio-Chem Technology Group Co., China's largest lysine producer by output, said Friday it has raised domestic lysine prices in mid-May by 12 percent on China's strong meat demand.

 

The Hong Kong-listed company said it would not increase lysine capacity in the near future, as domestic prices are still recovering from last year's lows due to oversupply, Co-Chairman Xu Zhouwen told Dow Jones Newswires.

 

The company raised its lysine price to RMB 14,500 a tonne, from an average of RMB 13,000/tonne between January and mid-May, Xu said. The price averaged RMB 11,000/tonne last year.

 

One reason for the price increase was that demand has reached its highest in six years, he added.

 

In the January-May period, the company produced about 33,500 tonnes a month, or 22 percent more than the same period in 2006, he said.

 

The company plans to shorten the maintenance period of its facilities and bring an extra output of 2,000 tonnes a month.

 

In China, the profit margin for lysine has been under pressure since last year, due to weak selling prices from excess capacity and high corn prices.

 

Analysts expect a mild recovery in China's lysine prices this year, as some producers in the region closed down their facilities, or plan to do so, due to low returns.

 

Xiwang Sugar Holdings Co. last year switched some of its lysine production to glutamic acid, a raw material for monosodium glutamate, or MSG.

 

Global Bio-Chem's annual lysine capacity totals 280,000 tonnes.

 

In addition, the company is expanding into the production of polyol, a corn-based biochemical which has similar chemical properties to petroleum-based ethylene and resin. Polyol is used in making of insulation, industrial sealant, cushion foam and building materials.

The average selling price of its polyol was about RMB 11,000 a tonne in the first five months this year, of which about 40 percent was from corn costs, he said.

 

Xu expects corn prices to fall to below RMB 5,500 a tonne by the end of the year, as the operation of its polyol plants would help lower the total corn cost through bulk purchases.

 

Global Bio-Chem's two polyol plants in Changchun, Jilin province would produce a total of 210,000 tonnes of polyol per year.

 

Separately, the company said in late April it applied for a separate listing of its sweetener unit, Global Sweeteners Holdings Ltd., on the Hong Kong stock exchange.