Market Analysis - Monthly Report - August, 2020 - Xanthan Gum

Raw materials:

In August, the auction of state-owned reserve was still in normal operation. With the support of downstream demand, the auction of national reserve corn was hot at the beginning of the month. With the modification of the auction rules, the premium situation of corn auction was eased, and the average transaction price of national reserve corn auction at the beginning of the month was slightly lower than that at the end of July. The policy premium situation has eased, and the wait-and-see attitude of trade entities has increased slightly. Deep processing enterprises in Shandong and other places have slightly reduced the purchase price of corn this week, driving the overall price rise of domestic corn market to stabilize.

In the middle of August, as the state-owned corn was gradually put out of the supply market, the wait-and-see attitude of the trading subjects increased. In addition, the auction rules were revised again, the high premium of the auction transaction of the state-owned reserve was eased, and the average transaction price of the state-owned reserve fell for two weeks in a row. The deep-processing enterprises adjusted the purchase price, driving the domestic corn market price higher and falling slightly. At the end of the month, the average transaction price of the national reserve auction fell to 1919 CNY/ton, and the transaction rate decreased. In late August, the domestic corn market price continued to adjust weakly in line with the policy.

On August 27, 2020, the grain trading coordination center of the State Grain and material reserve bureau and the provincial (District, city) national grain trading centers organized and held the national temporary storage corn bidding trade fair, and planned to list and trade 3988499 tons of corn in Heilongjiang, Jilin, Liaoning and Inner Mongolia in 2015, 2016 and 2018, with a transaction volume of 3546757 tons, a transaction of 88.92%, and a maximum price of 2210 CNY/ton, The lowest price is 1640 CNY/ton, and the average transaction price is 1919 CNY/ton.

In August, the domestic pig price fluctuated downward and fell slightly by 1.02%. In August, the domestic egg price dropped by 9.96%. In general, the breeding market was still at a high level in the year, the pig stock continued to increase, the egg demand in the beginning of school season was gradually rising, and the corn feed demand in the future market would continue to increase, which would support the corn market price in the future.

It will take time for the new season corn to come into the market, and the domestic corn market price will continue to fall to a reasonable range with the policy corn delivery price.

Factory conditions:

Fufeng: The price of Fufeng has been significantly reduced this month. After a round of personnel adjustment, the sales channel of Fufeng tends to be stable. At present, the new policy is that the company does not allow the addition of new domestic traders. Under the influence of the new policy, merchants relying on Fufeng are greatly affected. In addition, due to the strong development of Meihua in xanthan gum market in recent years, traders will gradually put more purchase quantity on Meihua, leading to fufeng's decline in the future.

Meihua: The Meihua is basically finished due to the influence of food-grade bacteria contamination, and the new delivery date is close to unlimited. At present, the food-grade mainly produces European and American standards. For the customers who need national standard before and have orders in Meihua that haven't been delivered for a long time, Meihua will arrange to send European and American standard goods to be downgraded to national standard goods to execute the order. Oil grades are still relatively large, but they turned off-season starting in June and are traditionally expected to last beyond September. At present, the new policy announced by Meihua is to limit the quantity but not the price, and to sign a framework agreement to limit the monthly quantity required, and the price will follow the market, but the customer who signs the framework agreement will get a price 500 yuan lower than the market price.

Deoson: In recent months, the demand for Xanthan gum is not strong, and the market price has dropped, leading to a decrease in the order quantity of Deoson and an increase in the inventory of the factory. This month, Deoson's new policy is to reduce the price of food-grade Xanthan gum. The price of Xanthan gum has been close to the same level with Fufeng, and the price policy is expected to remain until the end of August.

Jianlong: At present, Jianlong company has been in normal production and normal supply. The production capacity of the new production line is 1W tons, and the production capacity of the old equipment is 1W tons. The company mainly produces food grade products, and the production of Oil grade products is temporarily suspended. The price of 80 mesh of food grade is 2000 US dollars, and that of 200 mesh is 2100 US dollars.

ECHEMI summary:

This period raw material price increase is more obvious, xanthan gum cost slightly increased. However, the epidemic situation abroad is still serious, resulting in weak overall demand for xanthan gum and long-term weakness of demand, resulting in the price of xanthan gum is difficult to be firm, domestic factories began to reduce prices on a large scale. The price reduction of the three domestic factories is basically the same, indicating that the xanthan gum market has entered a declining trend, the continued hot situation in the first half of the year is expected to cease to exist this year.

Market forecast for the next period

ECHEMI forecasts:

On the raw material, the price of corn starch stable with rising, xanthan gum cost has risen. However, the impact of the foreign epidemic has not been eliminated, xanthan gum market demand continues to be weak, export hindered. In the case of insufficient orders received by factories in May and July, all factories overstocked. Factories eager to clear inventory, so they will start to cut prices sharply. But the current situation of xanthan gum market in August is still not optimistic, it is expected that in order to pursue orders in August ,factories will cut prices to compete, so a new round of price war is about to start.