China's corn sweetener producers are embarking on a new stage of growth, with a recent upsurge in capital investment allowing them to offer significant volumes of value-added products.
China has been producing corn sweeteners for years but the sector has only recently invested in production of high fructose corn sweetener, long the sweetener of choice for beverage producers in the US. The industry now looks ready to offer sufficient volumes of HFCS to major food and beverage companies. "It's always a chicken and egg situation with HFCS. Customers don't sign up until there is sufficient capacity but producers don't invest in capacity until they know they have the demand," said Simon Bentley, head of sugars and sweeteners research at UK consultancy LMC International. But several factors have triggered new industry investment in this ingredient in the last year. One of the major factors has been soaring sugar prices. During the last year, sugar prices have hit CNY6000 (€589) per ton, up from CNY2600 the previous year, after a drought reduced a significant part of China's sugar cane crop. Although prices have dropped again to under RMB4000 per ton, they are set to stay high into the coming year. With HFCS competing directly with cane sugar, a significantly lower price allows the product to take some of sugar's dominant share of China's sweeteners demand. HFCS costs about CNY2,400 per ton. "It looks much more competitive now against the sugar price," Bentley told AP-Foodtechnology.com. Corn sweetener producers have also been ready to make the capital investment in plants. With Chinese corn costs relatively high, large production scale is the main advantage for HFCS producers. The industry now has large, upstream facilities that can be enhanced to produce the sweetener. Companies like Luzhou Bio-chem and Global Bio-chem are among those investing in this ingredient. Luzhou, which listed on the Singapore stock exchange earlier this year giving it new funds for capacity expansion, has recently announced that it will has new capacity of 225,000 tons of HFCS. Bentley believes HFCS producers may also be benefiting from the downturn in saccharin. The Chinese government has restricted production of the intense sweetener in recent years, citing damage to the environment. Some suspect however that Beijing was unwilling to encourage growth of a low volume, chemical product. "If you take out the growth that would have gone to saccharin, then most of it probably went to corn sweeteners rather than sugar," said Bentley. "But it shouldn't be taken out of perspective. The vast majority of sweetening still comes from sugar, sold in millions of tons compared to the thousands of tons of HFCS," he noted.This reality is however driving an industry push to educate customers about the benefits of corn sweeteners. "We have very strong R&D so we are teaching customers about new applications," said Jennie Leo, finance manager at Luzhou Bio-chem. Luzhou has seen a 60 per cent increase in demand for its corn sweeteners from food makers for the first nine months of this year. As China's increasingly competitive food and beverage industry starts seeking higher margins, sweetener makers can market the functional advantages of corn sweeteners. Typically in liquid form, the sweeteners are easier to formulate in specific foods and beverages than cane sugar. For example, cane sugar will crystallize in ice cream whereas liquid corn sweetener does not. Luzhou, which claims to have a 25-30 per cent share of the domestic liquid corn sweeteners market, is also marketing new applications for its corn sweeteners.
Leo says 15 per cent of its sales now go to the brewing sector for use in fermentation. High maltose corn syrup is sold to brewers like Qingdao, replacing rice and wheat traditionally used in fermentation. "People are beginning to accept corn sweeteners as an ingredient in their manufacturing process," she said. Moreoever, many companies in Asia believe corn sweeteners to be healthier than sugar. Unlike the US, where there has been wide media reporting of studies suggesting a link between HFCS and obesity, foodmakers using corn sweeteners can expect growth from health-conscious consumers. In an interview with Reuters in September, China Sugar Association chairman Jia Zhiren said that starch-based corn sweetener would likely replace between 700,000 tonnes to 800,000 tonnes of natural sugar consumption in China in the year beginning October, up from 600,000 tonnes the year before. Production would hit 5 million tonnes this year, up from 4.3 million tonnes in 2005, he told the news service. HFCS is set to account for an increasing share of this growth in corn sweeteners now that it is being produced in significant volumes and has been adopted by the food industry.
"Unless there's a serious structural change, I see it as having a long-term future in China," said Bentley.