The European Union has released preliminary news regarding the anti-dumping investigation on erythritol from China. The European Commission recently announced its intention to impose provisional tariffs ranging from 51.8% to 294% on erythritol products originating from China. According to information from Sanyuan Bio (301206.SZ), the current situation is not yet final, and the official preliminary ruling will be announced on July 20th. The actual impact on the market is still to be assessed.
On November 21, 2023, the European Commission issued a notice stating that it had received a complaint from Jungbunzlauer, which alleged issues such as price and cost mismatches with Chinese erythritol products. Consequently, the Commission decided to initiate an anti-dumping investigation on erythritol products from China, involving several domestic companies listed in the sugar substitute industry, including Sanyuan Bio and Baolingbao (002286.SZ).
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The European Commission has recently published preliminary investigation results, proposing to impose a provisional tariff of 51.8% on Baolingbao, a 105.6% provisional tariff on Dongxiao Biotechnology Co., Ltd., and a 156.7% provisional tariff on Sanyuan Bio, a major erythritol producer. Other companies face provisional tariffs ranging from 152.9% to 294%.
Today, when the reporter contacted Baolingbao's securities office as an investor, the staff confirmed that they had seen the European Commission's announcement and accepted it, stating that "it is basically the final result."
However, the staff at Sanyuan Bio's securities office indicated that the company is still appealing the decision, and the preliminary ruling is expected to be announced around July 20th. The specific situation will be announced separately after the official results are disclosed.
It is worth noting that domestic erythritol companies in China have just recovered from a period of oversupply. The pandemic has driven a rapid increase in domestic demand for erythritol, attracting a significant amount of capital to enter the market. The new production capacities that began to enter the market in 2022 led to a situation where the total new production capacity of erythritol in China was about five times the actual demand that year. As a result of oversupply, the price of erythritol in China fell from 40,000 yuan/ton to 9,500 yuan/ton in 2023.
Starting from the end of 2023, this situation has improved. Sanyuan Bio also stated at a recent performance meeting that the cutthroat competition within the domestic erythritol market has significantly weakened since the end of 2023. The reporter also noticed that the current market price of erythritol in Shandong has returned to around 13,000 yuan/ton. In the first quarter of 2024, the performance of various sugar substitute stocks has seen a certain degree of recovery.
However, a considerable proportion of the erythritol produced domestically is used for export. In 2023, Sanyuan Bio's foreign sales accounted for as much as 76.8% of its total revenue. Previous announcements showed that from October 1, 2022, to September 30, 2023, the amount of Sanyuan Bio's products exported to the EU accounted for about 18.8% of the company's business income. There are concerns within the industry that the EU's imposition of high tariffs on Chinese erythritol could bring new impacts on the industry's supply and demand.
Today, the staff at Baolingbao's securities office responded to this by stating that the proportion of the company's erythritol exported to the EU is relatively small, and the main products exported overseas are other high-end sugar substitutes. Therefore, even if anti-dumping duties are imposed, the impact on the company's performance is expected to be limited. Sanyuan Bio, on the other hand, stated that the temporary tariff has not yet been implemented, and the company will be able to make a final assessment only after the official preliminary ruling is announced.