Sales soar for Chinese potato starch supplier

By Lindsey Partos

- Last updated on GMT

Related tags Starch European union

There is evidence that European potato starch suppliers are losing
out to Chinese competitors, as anti-dumping measures drive rampant
growth for leading Chinese starch maker.

China Essence, a Chinese potato processing producer, this week reported a considerable 65 per cent growth in revenue, f rom RMB 521.2 million (€48m) to RMB 858.8 million (€79m), and a 48 per cent hike in operating profit to RMB 302 million (€27m) for the year ending March 2008.

Citing a lift in volume and price for potato starch as key growth drivers for the end of year figures, the firm also clearly attributed the upbeat results to recent measures by China to protect its domestic potato starch market.

"Underpinning the demand is the anti-dumping regulations on potato starch manufactures from the European Union," said the group on Monday.

A statement backed up by the figures that show sales for potato starch products alone leapt 158 per cent over the full year ending in March 2008. Rising from RMB211 to RMB547 million, potato starch contributed a considerable 63.7 per cent to the group's overall revenue for the year.

This, despite the fact that the potato starch products are lower-margin, and that the firm reported increased costs for potatoes as having an impact on the gross profit margin.

Indeed, the Chinese company confirmed that in pace with demand, two new plants for potato starch production are in the pipeline.

Expected to be operational in the second quarter of the full year 2010, China Essence stated the plants will lift annual production capacity for potato starch from 180,000 tonnes to 260,000.

In force since February 2007, anti-dumping measures imposed by the Chinese ministry of commerce (MOC) on European producers set punitive duties of between 17 per cent and 35 per cent on their merchandise, depending on "how serious the MOC judges the dumping to be," the ministry said when it announced the tariffs last year.

The move followed a year long investigation by the Chinese government into imported starch that concluded " imports have done severe damage to the domestic starch industry."

Leading European potato starch supplier Avebe saw a duty of 18 per cent imposed, and Avebe Kartoffelstarkefabrik Prignitz/Wendland a rate of 17 per cent, all other companies faced 35 per cent.

According to China's ministry of commerce, the anti-dumping measures on potato starch from the EU are set for a duration of five years, from 6 February, 2007.

While accepting the country's need to protect its ingredients industry, European Commission spokesperson Michael Mann said at the time that the EC was disappointed at the decision to impose the tariffs on a market it estimates accounts for 5 - 10 per cent of its total potato starch sales.

"The European Commission is very disappointed with China's decision to impose anti-dumping duties on imports of potato starch from the EU, given that this is an important market for EU exporters," he said.

But with a combative rhetoric he added: "The EC will continue to make representations on these issues at every level with the Chinese."

Potatoes, the world's number one non-cereal food commodity with global production levels reaching a record 320 million tonnes in 2007, and ingredients derived from the crop, are set to experience growing demand as cereal prices continue to soar and food makers turn to ingredients sourced from non-cereal reliant sources.

Starches sourced from potatoes have a neutral taste and are used widely by food formulators for their ability to control texture and viscosity.

Approximately 100 kilos of potato yields 1.5 kilos of protein and about 18 to 20 kilos of starch.

These starches contribute to a European food starch market, that also includes wheat and corn, valued by market analysts Frost & Sullivan at some €2.4bn in revenue terms in 2007, and 4.6m tonnes in volume.

While volume growth rate came in at less than one per cent for the year, opportunities to boost this figure reflect an industry-wide trend - the area of healthier food formulations.

Prices in Europe for potatoes remain bullish, with the UK's potato council reporting this week that t he British weekly average price rose by £1.38 to £182.57 a tonne last week as processing contracts increased.

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