Last week saw China’s Meihua Bio sign a restructuring framework agreement with the parent company of Korea’s CJ Cheiljedang — the CJ Group, said researchers at China based business intelligence group, CCM.
“Meihua Bio and CJ Group are the primary manufacturers of amino acids in the world. Both of them have achieved and maintained a leading position in global lysine, threonine and tryptophan markets.
If CJ Cheiljedang and Meihua Bio were to be integrated, they would account for 34.1% of the global lysine supply,” said the analysts in a report evaluating the potential consequences of such a deal for the amino acid industry.
Overcapacity
“Pressured by environmental protection and major overcapacity, restructuring and mergers between enterprises have been the primary focus of the amino acid industry since 2014,” the CCM team noted.
According to a study conducted by that business intelligence group, there are currently seven large scale manufacturers in the global lysine market. Collectively, said the researchers, the top three are capable of satisfying global demand.
“Last year marked a period of serious overcapacity in the industry, with global capacity hitting approximately 3,500,000 t/a, and output reaching only 2,180,000 tons.
Industry consolidation and integration are continuing in the global lysine industry, and lysine capacity reduction is also continuing,” wrote the CCM analysts.
Global demand for lysine is around 1.85 million tons per year, while demand in China is around 0.68 million tons annually, according to data from the China Fermentation Industry Association.
Its data puts global lysine capacity at 3.54 million t/a, with Chinese production covering around 2.13 million t/a of that.
Threonine and tryptophan supply consequences
CCM reported that, combined, Meihua Bio and CJ Group, would encapsulate 38% of the global threonine supply.
They said that the integration of the two Asian producers is also regarded by many as an opportunity for CJ group to penetrate the Chinese tryptophan market. “In addition, this move will help to solidify CJ group’s leading presence in the global market. The CJ group currently accounts for 37% of total tryptophan capacity worldwide,” said the CCM team.