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CCM: Corn starch: 13 percent export rebates will not save the market in China in 2016


Export rebates rate for corn starch and alcohol has been re-adjusted back to 13% since Sept. 1 2016 in China. However, the adjustment on export rebates will not save the corn starch market in China, according to analyst CCM 



Source: Baidu


In Aug. 19, China’s Ministry of Finance (MOF) and China’s State Administration of Taxation (SAT) jointly released the Notice on Re-adjustment on Export Rebates Rate of Corn Deep-processed Products (the Notice). According to the notice, since Sept. 1 2016, the export rebates rate for corn starch and alcohol has been re-adjusted back to 13%.


Adjustment of export rebates rate on corn starch and alcohol in China in the past few years


Date

After adjustment

Before adjustment

June 1 2009

5%

0%

July 15 2010

0%

5%

Dec. 31 2014

13%

0%

Jan. 1 2016

0%

13%

Sept. 1 2016

13%

0%


Source: MOF and SAT and sorted in CCM Online Platform


Though the Chinese government is encouraging the export of corn starch by increasing the export rebates rate, CCM believed that it is of little use to help the corn starch industry in China because of the following reasons.


Trapped in overcapacity


Corn starch deep-processing industry is an industry with serious overcapacity. According to CCM’s research, in 2015, only 56% operation rates in the production guaranteed the enough supply for the corn starch processing industry.


Capacity keeps expanding


In H1 2016, affected by the temporary storage policy and auction policy in China, the corn price was low in China. And the corn starch processing industry in North China increased greatly in the profits, which led to the expanding capacity of corn starch in 2016/17.


Based on CCM’s research, in 2016/17, it is expected that China will have a new capacity of 3 million t/a for corn processing, including 2 million t/a of capacity for corn starch processing. 



Comparative advantage of corn starch is what matters to export volume in China


In fact, in 2015, the Chinese government also has the export rebates rate of 13% on corn starch in China. The export volume of corn starch was 74,000 tonnes in 2015, up 30.9% YoY. However, the significant growth was attributed to the small figure of export volume in 2014.


On the contrary, in Jan. – July 2016, without the support of export rebates rate in China, 55,235 tonnes of corn starch was exported, up 151% YoY.


That’s to say, the comparative advantage of corn starch is what matters to export volume in China when it is compared to its rival commodities like Southeast Asia cassava starch.


Taking the advantages of the US corn and Southeast Asia cassava starch into consideration, CCM believed that since Sept. 2016, the export volume of China corn starch will increase obviously, but the increasing volume is just several thousand tones, which is hard for it to recover to its peak of over 400,000 tonnes of export volumes.


Even if the export volume of corn China reaches 400,000 tonnes, it is hard to compete with the overcapacity of 13 million t/a.


In all, the 13% export rebates tax can only benefit some exporting enterprises but can not save the whole corn starch industry in China.


Looking for more information on corn market in China? Want to monitor the corn price China? CCM Online Platform is here to help you! An infinitive database, covering the whole pesticide industry in China, gives you ENTIRE access to CCM’s over 15-year data and intelligence.


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About CCM:


CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.


 


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