Frequently Asked Questions

Q1. Is Soya meal a substitute to lysine? How does the price of Soya meal affect the price of lysine?

Soya meal is a type of macro-ingredient in feed which contains 8-15% lysine. In contrast, lysine is a micro-ingredient in pure form. In the past, Soya meal had been popular among many farmers supplying lysine in animal diets when the price of soya bean was low and the farmers did not have extensive knowledge on the additive ratio. However, they may need about ten times more to supply sufficient amount with today's lysine prices and this is not cost effective. The side effect of having too much Soya meal is excessive fat, which is not healthy for animals.

It has been observed over the past two years that there was no direct relationship between the price of Soya meal and lysine.

Q2. What products are exported and why not others? Where do our products go outside China?

We export 98-lysine and protein lysine to different parts of the world including Europe, the US, Australia, India and Japan etc. We also ship corn-refined products such as corn gluten and corn fibre to Asian countries for feed manufacturing since these places have a lot of meat production.

A small portion of protein lysine also goes to overseas customers. Corn sweeteners are usually in liquid form,  which makes transportation difficult, whereas most countries have their own sugar production.



Q3. Which regions are targeted for lysine export?

Our target is Europe since the area has minimal domestic production of lysine and used to rely heavily on imports from the US. Countries such as Holland, Norway and Germany are potential markets since these regions are associated with salmon fish production.

Q4. How do you predict the Group's export sales?

Exports accounted for approximately 22% of our total turnover in 2007 and the total amount lysine shipped was about 66,240 mt. Our full year target of lysine exports for the year 2008 is approximately 30% of our production volume.  

Q5. What is the lysine demand situation?

In 2007, the global demand for lysine was around 900,000 to 1 million mtpa, of which the leading-consumer China takes up approximately 25%, i.e. 300,000 mtpa. China's growth rate stands shoulder-to-shoulder with the world's level with around 5-10% annually. The growth is mainly driven by a higher  standard of living plus rising meat consumption.

Q6. What are the market shares of Global Bio-chem in the lysine industry domestically and globally?

The company is now holding a market share of about 70% in China, and about 30% worldwide.

Q7. Why are there only a few global players in the lysine industry?

The lysine industry is very unique in that over the last ten years. It was occupied by only a few global players. The entry barrier is the difficulties of fermentation with good yield.

Q8. What  is the current position of Global Bio-chem in the lysine industry?

We have a production capacity of 140,000 mtpa and 220,000 mtpa for 98-lysine and 65-lysine respectively. We believe that we are one of the major players in the industry.

Q9. Is lysine a commodity?

Lysine should not be regarded as a commodity since the technology requirement for its production is very high.

Q10. Has the Group applied for any patent rights for lysine production?

We have not applied for any patent rights regarding the lysine production techniques. 
 

Q11. Who are the customers of lysine?

We mostly sell to agents but the feed producers may also
purchase from us.

Q12. What are the differences between lysine and protein lysine?

Both lysine and protein lysine are feed additives which only  differ in their lysine content. Lysine is a conventional feed additive that has 98% lysine content, so it is known as 98-lysine. The relatively new product protein lysine contains 65% lysine and the rest is mainly protein. 

The production cost of protein lysine is lower compared to lysine. We enjoy further cost savings in the production process since there is no sewage treatment during production.

 

Q13. How does the Group regulate the price of protein lysine?

Theoretically the price of protein lysine should be set at 65% to that of 98-lysine according to its lysine concentration. We offered some discounts of around 60% on lysine's price for this product when it was first launched in 2004 to gain acceptance by our clients. The product was quickly absorbed by the market since the feed producers benefited from the lower price with free additional protein. Currently, the product is selling at a price of about 50-55% of the lysine's price.

 
Q14. How does the new micro-organism impact your lysine production?

Lysine and protein lysine production require fermentation by micro-organisms which digest the raw material, i.e. glucose, and turn into lysine with proper yield. The new micro-organism has been applied to our production since the 2Q 2005. It is capable of increasing the yield from 45% to 55%, and reducing the consumption of utilities. Figures of the 1H 2005 revealed that our production cost was reduced by 21% with the application of the new micro-organism. We also expect that our production volume can record a 10% growth next year due to the enhanced efficiency after the full utilization of this new bud.



Q15. Who are IPP?

IPP stands for 'International Polyols Partners', a name for the collectively two partners: namely IPCI (International Polyol Chemicals Inc) from the US and IGP (Icelandic Green Polyol) from Iceland.



Q16. What are the raw materials? How does the group source them?

Corn is the key raw material for the Group. Generally from November to March it is cheaper to buy corn from farmers, while from April to October we purchase from the national warehouse at a relatively higher price. We keep an amount of up to three-month to four-month inventory over the past few years, and there is a continuous replenishment for our inventory as it has been used up.



Q17. What are the benefits of the acquisition of Dacheng Industrial?

In the first half of 2005, the Group entered into an agreement to acquire the entire equity interest in Dacheng Industrial at a consideration of HK$900 million. The major assets of Dacheng Industrial are comprised of the minority interests in eight indirect non-wholly owned subsidiaries of the Company and certain vacant sites for industrial uses near the main production plant of the Group in Changchun. Through the acquisition, the Group acquired the remaining interests in those subsidiaries held by Dacheng Industrial so that the Group obtained full control of, and financial benefits from, those non-wholly owned subsidiaries and their future expansion plans.

It is the aim of the Group to use the lands owned by Dacheng Industrial for the expansion of the polyol project and the related facilities, including but not limited to, a corn kernel warehouse and a corn-processing refinery. The acquisition would not only increase the profit attributable to shareholders but also increase the flexibility in managing and integrating the operation of various subsidiaries, thus strengthening the Group's competitive edge in the industry.