June 30, 2005

 

South Korea's CJ Group seeks to tap the full potential of China lysine market 

 

An eFeedLink exclusive report
 

 

CJ Group's new lysine production facility in Liaocheng, China, commenced production on June 15 after more than a year of construction. The official ceremony to mark the commencement of production was held on June 22. With the China lysine market already showing signs of saturation in the past year, why would CJ still go ahead with the construction of the lysine production facility? And as one of the world's leading producers of feed grade lysine, what were CJ's main considerations when making the decision to set up this plant?

 

On December 3, 2003, South Korea's CJ Group signed a US$100 million joint-investment agreement with Shandong Liaocheng Economic Development Zone to set up CJ (Liaocheng) Biotech Co., Ltd, a 60,000-tonne lysine production facility. Following the injection of US$48 million in the initial phase of the project, the first batch of 65-percent lysine has since made its market entry. To date, including the annual output of 150,000 tonnes from its facility in Indonesia, CJ Group's total lysine production capacity has already reached 210,000 tonnes.

 

Mr He Feng Zhu, Inspector General of CJ China Limited, gave an insight into the primary factors leading to the company's foray into China.

 

The China livestock industry has shown rapid development in the past few years. Lysine consumption by the domestic feed industry has also risen in tandem, registering an annual growth of at least 10 percent. To effectively meet the demands of the China market, consolidate its leading position in the industry and to expand its market share, CJ Group has been looking to invest and establish a production facility in the country since 2002. The Group eventually decided on Shandong Liaocheng Economic Zone to set up its production facility for L-lysine products, in view of its well-developed agricultural industry infrastructure as well as abundant natural and labour resources.

 

CJ Group has more than 40 years of experience in lysine production, According to Mr He, competition is inevitable in the achievement of progress. He acknowledged that the current dismal China lysine market would undoubtedly pose an enormous challenge to the Group's production operations in the near future, but added that the market situation will evolve as industry players adjust to the dynamics of the market. 

 

CJ Group was not guided by short-term gains, and has an optimistic outlook of the long-term development of the industry. China possesses immense market potential; its current annual pork consumption of 33kg per capita is expected to continue to rise in the next few years. The current resource in China would not cater adequately to the needs of the expected growth.  Hence, CJ Group saw the need in the continual expansion of its lysine operations. The Group also hopes to use its production facility in Liaocheng as a springboard to Asia and the rest of the world.

 

Market competition has intensified in China and lysine prices have also fallen to record lows in recent years. However, the Group has been closely monitoring market trends and diversifying its business strategy to adapt to domestic needs since its entry into China in 1992. Thus, it was able to effectively deal with the challenges with the help of experience accumulated through the years.

 

The CJ Liaocheng facility commenced production in China at a period when the domestic lysine market was in the doldrums. In response to how to penetrate the market in the shortest possible time, Mr He quoted the three strengths of CJ Group: superior product quality, comprehensive after-sales service, and a well-established distribution network.

 

Mr He added that the Group's foray into the lysine market was fuelled by long-term strategies. By staying away malicious competition, CJ seeks to develop the full potential of the lysine market along with other lysine producers.

CJ Group was established in 1953, and is currently listed as the thirteenth largest company in South Korea.

 

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