A fragmented industry and underutilisation of equipment and factories will force Chinese manufacturers of feed additives to merge, acquire competitors and reorganise for future survival, a recent market research concludes.
In 2009 the Chinese feed additives industry faced great pressure from falling demand, causing a great number of small and medium enterprises (SME) stopping operating.
China’s total feed output, from January to March of 2009, was 25.3 million tonnes, a decrease of 6.3% comparing to the same period of the previous year.
Presently, there is severe overcapacity in Chinese feed industry with the equipment utilization rate below 50%.
Production from the top 10 companies accounts for 27% of total output. The Tongwei Group, a major player on the feed additives market in China, produces approximately 4.2 million tonnes of the respective products per year; its output is projected to achieve five million tonnes by the end of 2010.
However, the annual production of one average feed producer is even less than 10,000 tons.
Feed additives enterprises are forced to adjust their strategies (larger scale, more perfect industry chain and complete value chain) to reduce production, sales and management costs for survival.
According to international experience, there will be only several hundreds of feed enterprises in China in the future.
The competition among Chinese feed additives enterprises is transferring from the product competition to the value chain competition as well as from the single feed production to the supply of solutions for numerous raisers.
The key factor for success is to provide services with higher value for raisers.
In the following 3-5 years, the feed enterprise number will continue to decrease while the market concentration will be improved, leading to mergers and acquisitions and reorganization in this industry.
Lately Beijing has approved a broad series of tougher food-safety laws following a series of safety scandals that killed Chinese citizens and degraded the international reputation of the country's exports.
But given the compilations with implementing laws in China, it's unclear whether and when the legislation will affect food and feed markets.
Strongly influenced by demand for meat and meat products, the worldwide animal feed additives market is expected to reach US$15.4 billion by 2010.
Europe, Asia and North America are the leading consumers of animal feed while swine is the largest type of meat produced followed by poultry.
In 2008, Chinese industrial animal feed production
amounted to 137 million tonnes with the production of compound feed, concentrated feed and feed additive premix accounting for 77.5%, 18.5% and 4% of the total feed production respectively.