July 13, 2006

 

Global Bio-Chem dominates China's market thanks to low production costs 
 

 

Using the latest in biotechnology, Global Bio-Chem has managed to cut production costs and be on top of the game in the intensively competitive China lysine market.

 

Global Bio-Chem said during the second quarter of 2005, it began using a more efficient type of micro-organism which yielded 45 percent to 55 percent more lysine and brought about 21 percent in savings.

 

In a press release, Global Bio-Chem grouped its competitors into 3 categories.

 

The first, small-scale producers whose production costs are at RMB16,000 a tonne, has for the most part, exited the market.

 

The next, mid level producers, who churn out lysine at RMB12,000-RMB13,000 a tonne,are more efficient. However, as prices remained low, these manufacturers have either cut production or switched to marketing other amino acids.

 

The last group, which the company terms "global peers", are companies capable of producing lysine at RMB 7,000 a tonne. By virtue of the fact that it is neither a small-scale producer nor has it cut production, Global Bio-Chem hints it is in this category. The company did not elaborate in its statement whether this would be the cost of 98 percent lysine or 65 percent lysine or whether it is a fixed or variable cost.

 

Global-BioChem's exports reached 15,000 tonnes and contributed over 18 percent to the company's turnover in the first half of 2005, according to the statement. The company had targeted 50,000 tonnes for the full year but did not disclose whether it reached that target.

 

Although Global Bio-Chem believes the lysine market is growing at 10 percent yearly, it has set this year's target at 80,000 tonnes, an ambitious 60 percent increase. The company has its sights set on Europe as one of its key growth areas, the statement said. 

 

The company has an annual 140,000 tonne production capacity for 98 percent lysine and 220,000 tonne capacity for 65 percent lysine.

 

Global Bio-Chem claims in its statement it has cornered 70 percent of the lysine market in China. Worldwide, it estimates that the market would be about 900,000 to 1 million tonnes a year. 

 

GBT also admits slashing the price of its protein lysine when it first marketed the product in China in 2004. The company's protein lysine is currently selling at 50-55 percent of the price of 98 percent lysine, the press release said.