MIIT announces that enterprises with inferior capacity and high pollution and energy consumption in citric acid, MSG and alcohol industries are to be eliminated by late 2012.

1. Inferior capacity of citric acid, MSG and alcohol to be eliminated by late 2012
Summary: MIIT announces that enterprises with inferior capacity and high pollution and
energy consumption in citric acid, MSG and alcohol industries are to be eliminated by late
2012.
Tags: Lysine, corn starch, furfural, starch sugar, vitamin c, corn, fuel ethanol, citric acid,
monosodium glutamate, pollution
On July 9, 2012, the Ministry of Industry and Information Technology (MIIT) announced that
enterprises with inferior capacity and high pollution & energy consumption in some industries,
including citric acid, monosodium glutamate (MSG), alcohol, paper-making, iron and steel are to
be eliminated in late 2012, according to CCM International’s August issue of Corn Products
China News.
Acccording to the announcement, all enterprises listed shall shut down their production lines by
the end of 2012, or they will be punished by Chinese government, showing the government's
determination to regulate domestic highly-polluting and energy-intensive industries. For example,
the government will withdraw their pollutant discharge licenses and conduct other detailed
punitive measures (Please refer to Corn Products China News 1107).
As for corn deep-processing industry, a total capacity of 70,000t/a citric acid, 143,000t/a MSG
and 574,000t/a alcohol, were in the list (TABLE, TABLE and TABLE). Seeing the high pollution
and excessive capacity in these three industries, in 2007, National Development and Reform
Commission and State Environmental Protection Administration (currently known as the Ministry
of Environmental Protection of China) co-issued Notice on the Elimination of Backward
Capacities in Papermaking, Alcohol, MSG and Citric Acid from National Development and
Reform Commission and State Environmental Protection Administration (the Notice) to regulate
domestic citric acid, MSG and alcohol industries.
Generally, eliminating production lines with high pollution & energy consumption is helpful to
improve the competitiveness of related industries, especially MSG and citric acid, in China, which
is the largest production and export country of MSG and citric acid. Specifically speaking, the
elimination will make domestic MSG and citric acid producers raise the quality and yield rates of
their products, enhancing the competitiveness of their products and themselves.

2. Besides, the elimination can relieve the over-capacity of these products to some extent. In
general, the over-capacity of these products makes their producers get in cut-throat competition,
resulting in decrease or low level of their market prices and finally profit decrease or even loss of
producers. For example, due to the low market price and increasing cost of citric acid, COFCO
Bio-chemical (Anhui) Co., Ltd., a main citric acid producer with a capacity of 220,000t/a in China,
suffered profit decrease in 2011 and H1 2012 according to its 2011 annual report and H1 2012
report.
Furthermore, the elimination has different effects on different scaled enterprises. Usually, small
producers have inferior technologies, higher energy consumption & pollution than large-scale
producers do. As a result, they have to shut down their production lines or even the whole
company but large-scale ones don't. For example, Henan Lotus Flower Gourmet Powder Co.,
Ltd. (Lotus Flower Gourmet Powder), a main MSG producer in China with a capacity of
300,000t/a, has to eliminate three production lines of MSG with a total capacity of 113,000t/a
according to the elimination list (Henan Lotus Flower Gourmet Powder Co., Ltd. and Henan Lotus
Flower Enzyme Engineering Co., Ltd. are subsidiary companies of Lotus Flower Gourmet
Powder). But an insider from Lotus Flower Gourmet Powder indicated that its capacity wouldn't
sharply decrease because they planned to set up new production lines of MSG with advanced
facilities and technologies after the elimination.
Chinese government has reinforced the elimination of inferior capacities in recent years, as
clearly stated in some policies. For instance, the Notice just indicated that production lines of
citric acid that didn't meet national pollution discharge standard should be eliminated, but the
Catalogue for the Guidance of Industrial Structure Adjustment (2011 edition) published in April
2011 added that capacity of citric acid below 20,000t/a shall be eliminated.
As a matter of fact, the actually eliminated inferior capacities always exceeded the target. For
example, the target eliminating inferior capacity of alcohol in 2010 was 300,000t/a according to
the Notice while 688,000t/a capacity was actually eliminated. For another, the total eliminated
capacity of citric acid, MSG and alcohol in 2011 and 2012 has already exceeded the elimination
target in the 12th Five-Year Plan (2011-2015) (the Plan). It is predicted that Chinese government
will continue strengthening the elimination of inferior capacities in the rest three years of the
Plan.Inferior capacity of citric acid, MSG and alcohol to be eliminated by late 2012
On July 9, 2012, the Ministry of Industry and Information Technology (MIIT) announced that
enterprises with inferior capacity and high pollution & energy consumption in some industries,

3. including citric acid, monosodium glutamate (MSG), alcohol, paper-making, iron and steel are to
be eliminated in late 2012.
Acccording to the announcement, all enterprises listed shall shut down their production lines by
the end of 2012, or they will be punished by Chinese government, showing the government's
determination to regulate domestic highly-polluting and energy-intensive industries. For example,
the government will withdraw their pollutant discharge licenses and conduct other detailed
punitive measures (Please refer to Corn Products China News 1107).
As for corn deep-processing industry, a total capacity of 70,000t/a citric acid, 143,000t/a MSG
and 574,000t/a alcohol, were in the list (TABLE, TABLE and TABLE). Seeing the high pollution
and excessive capacity in these three industries, in 2007, National Development and Reform
Commission and State Environmental Protection Administration (currently known as the Ministry
of Environmental Protection of China) co-issued Notice on the Elimination of Backward
Capacities in Papermaking, Alcohol, MSG and Citric Acid from National Development and
Reform Commission and State Environmental Protection Administration (the Notice) to regulate
domestic citric acid, MSG and alcohol industries.
Generally, eliminating production lines with high pollution & energy consumption is helpful to
improve the competitiveness of related industries, especially MSG and citric acid, in China, which
is the largest production and export country of MSG and citric acid. Specifically speaking, the
elimination will make domestic MSG and citric acid producers raise the quality and yield rates of
their products, enhancing the competitiveness of their products and themselves.
Besides, the elimination can relieve the over-capacity of these products to some extent. In
general, the over-capacity of these products makes their producers get in cut-throat competition,
resulting in decrease or low level of their market prices and finally profit decrease or even loss of
producers. For example, due to the low market price and increasing cost of citric acid, COFCO
Bio-chemical (Anhui) Co., Ltd., a main citric acid producer with a capacity of 220,000t/a in China,
suffered profit decrease in 2011 and H1 2012 according to its 2011 annual report and H1 2012
report.
Furthermore, the elimination has different effects on different scaled enterprises. Usually, small
producers have inferior technologies, higher energy consumption & pollution than large-scale
producers do. As a result, they have to shut down their production lines or even the whole
company but large-scale ones don't. For example, Henan Lotus Flower Gourmet Powder Co.,
Ltd. (Lotus Flower Gourmet Powder), a main MSG producer in China with a capacity of

4. 300,000t/a, has to eliminate three production lines of MSG with a total capacity of 113,000t/a
according to the elimination list (Henan Lotus Flower Gourmet Powder Co., Ltd. and Henan Lotus
Flower Enzyme Engineering Co., Ltd. are subsidiary companies of Lotus Flower Gourmet
Powder). But an insider from Lotus Flower Gourmet Powder indicated that its capacity wouldn't
sharply decrease because they planned to set up new production lines of MSG with advanced
facilities and technologies after the elimination.
Chinese government has reinforced the elimination of inferior capacities in recent years, as
clearly stated in some policies. For instance, the Notice just indicated that production lines of
citric acid that didn't meet national pollution discharge standard should be eliminated, but the
Catalogue for the Guidance of Industrial Structure Adjustment (2011 edition) published in April
2011 added that capacity of citric acid below 20,000t/a shall be eliminated.
As a matter of fact, the actually eliminated inferior capacities always exceeded the target. For
example, the target eliminating inferior capacity of alcohol in 2010 was 300,000t/a according to
the Notice while 688,000t/a capacity was actually eliminated. For another, the total eliminated
capacity of citric acid, MSG and alcohol in 2011 and 2012 has already exceeded the elimination
target in the 12th Five-Year Plan (2011-2015) (the Plan). It is predicted that Chinese government
will continue strengthening the elimination of inferior capacities in the rest three years of the Plan.
Source: Corn Product China News 1208
http://www.cnchemicals.com/Newsletter/NewsletterDetail_6.html
Main content of Corn Product China News 1208:
Domestic VC suffers from anti-monopoly sue from the US
Brazil reaches price commitment with Chinese citric acid and citrate exporters
Chinese corn products Imp. & Exp. analysis in June 2012
Domestic market price of corn oil keeps stable in Aug. 2012
China's market prices of four key amino acids increase or keep stable in Aug. 2012
Baolingbao enjoys uptrend in its performance in H1 2012
Two new subsidiary companies to make Meihua Group more competitive
Shengquan Group launches 20,000t/a cellulose ethanol production line in Mid-August
Domestic corn starch sees depressed presentation in H1 2012

5. Inferior capacity of citric acid, MSG and alcohol to be eliminated by late 2012
China's import volume of corn surges by about 67 times in H1 2012
Domestic market price of DDGS sees uptrend in Aug. 2012
……
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