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AGR OC HEM I CAL S

China’s Highly Concentrated Glycine Market Displays Investment Chances Patrick Schreiber, Researcher at market intelligence firm CCM, explains the state of play of the glycine industry in China and reveals investment opportunities for market players.

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hina is the largest producing country of glycine worldwide. As the largest producer of glyphosate globally, China has a high and continuously growing demand for glycine. Tech-grade glycine (the lowest processed grade behind feed-, food- and pharmaceutical-grade glycine), which serves as the raw material for glyphosate, has a production share of almost 87% of all glycine in China. Domestic consumption of tech-grade glycine increased progressively between 2011 and 2014, benefiting from the increased output of glycine route glyphosate. In 2015, consumption declined because of the sluggish market and decreasing output of glyphosate. In 2016, more than 80% of tech-grade glycine was applied in the domestic glyphosate industry. As with many chemical industries in the country, where most of the companies are state-owned, China’s glycine production is highly concentrated. Donghua Chemical is the largest manufacturer (both in China and worldwide), producing all grades of glycine and accounting for about one-third of the nation’s total capacity. However, China’s glycine industry has witnessed over-capacity in the past few years. In 2010 for example, production capacity for glycine was 441,900 tonnes, with an actual output of only 173,450 tonnes. The year 2016 reached a capacity of 719,300 tonnes, while output climbed to 364,100 tonnes. While tech-grade glycine is consumed internally in China for the production of glyphosate (Figure 1), other grades are produced mainly for export. In 2016, China produced 47,600 tonnes of food-, feed- and pharmaceutical-grade glycine: 42,887 tonnes were exported, and 4,713 tonnes were consumed domestically.

Table 1 – Industrial concentration of tech-grade glycine in terms of output in China (Source: CCM) Number

Value 2016

2015

2014

2013

2012

2011

2010

Top one concentration ratio

34.8

50.0

53.7

53.3

50.3

49.7

52.3

Top ten concentration ratio

99.4

97.9

99.6

99.3

96.9

94.1

95.4

Investment opportunities in China The Asia-Pacific region, and especially China, are offering a good opportunity for investors in the glycine market since it holds a high market share and has prosperous growth perspectives. Importing tech-grade glycine from China or other low production costs regions into countries with no anti-dumping duty can indicate a profitable way to get cheap raw materials and process them into more valuable food-grade or pharma-grade glycine. It is pretty clear that the output of, as well as the demand for, glycine in China is based on tech-grade product. This situation is in contrast to overseas developed countries, which tend to focus on higher-processed glycine. Hence, international manufacturers have promising investment opportunities in China’s food-, feed- and pharmaceutical-grade glycine, as these fields are also witnessing growing demand in the country. Domestic demand for glycine from food, feed and pharmaceutical fields has kept increasing stably year by year. The increasing glycine demand from these three fields is expected to continue due to good characteristics and relatively wide application of glycine with these three grades, but it will have a slight impact on the domestic glycine market structure since the tech-grade glycine still takes up the majority of Chinese glycine market.

Applications of glycine

Figure 1 – Consumption of glycine in China by application 2016 (Source: CCM) Export destinations for China’s glycine include Germany, the Netherlands, Thailand, Japan and India. Of those, Germany had an export share of 20% in 2016, while the Netherlands are close behind importing 15% of Chinese glycine. However, cheap glycine from China has been punished with anti-dumping duties several times in countries like the USA or in Europe. China’s glycine price is mainly influenced by the price and demand of its main downstream market for glyphosate. Other important factors are government actions like inspections regarding environmental protection, which have effects on the production of glycine, and the prices for raw materials of glycine (mainly utropine and cloracetic acid).

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Glycine is an organic compound and represents the smallest of all amino acids found in proteins. The industrial production and sales of this amino acid in China can be segmented into tech-grade (98.5%), feed-grade (98.5-101.5%), food-grade (98.5-101.5%) and pharmaceutical-grade (98.5-101.5%). Hence, the four major downstream industries for glycine are the pesticide, feed, food, and pharmaceutical industry. In the food industry, glycine is mainly used as a nutritional supplement in food additives to improve flavour. In the feed industry, glycine is mainly used as a nutritional supplement in feed additives and feed attractants. The amino acid, used as a feed additive, can not only improve feed nutrition levels but also have the effects of antioxidation and prolong the shelf life of feed. In China, glycine is mainly used in cattle feed, sheep feed and chicken feed, with an additive rate of 0.07%. Last, of all, glycine is widely used in the field of pharmaceutical industry, stating an extensive rate, such as protective agents, stabilizing agents, amino acid nutritional injection solutions and intermediates of some medicaments.

CONTACT Patrick Schreiber CCM – Data & Business Intelligence Guangzhou, P.R. of China T: +86 206 293 8903 E: patrick.schreiber@kcomber.com

www.specchemonline.com

Speciality Chemicals Magazine December 2017  

Volume 37, Issue 06