CHINA¡¯S IMPORT MARKET FOR ESSENTIAL OILS

Winnie Yeung

Kallin International

Room 2305, OTB Bldg, 160 Gloucester Road, Hong Kong, PR China

[ winnieyeung@kallin.co ]

Introduction

Up until the end of the 1980s, the world market viewedChinaas one of the major global exporters of essential oils, rather than as a significant market.

Since 1990 and as a result of the progressive impact of the economic reform programme, major changes have occurred inChina:

            • The domestic market has grown rapidly for consumer products incorporating F&F ingredients.  In the not too distant future, this market will be the largest in the world.

            • The Chinese aroma chemicals manufacturing industry has grown tremendously and has captured a major share of the international market from the formerly dominant suppliers in Western countries.  In addition to the Chinese domestic companies, most of the major multi-national company F&F manufacturers have transferred their operations toChina, where capital investment and production costs are much lower.  As we know, top 10 of the biggest F&F already establish the factories.

            •Chinahas become a significant importer of some essential oils.

The reasons forChina¡¯s transformation to a volume importer of certain essential oils are:

            • Mainly to provide feedstock for the growing aroma chemicals manufacturing industry.

            • Partly to supply ingredients for the growing domestic consumer product market.

            • A decline in domestic production of some traditional Chinese essential oils.

Today, I wish to indicate possibilities for essential oil producers in this region to develop exports toChina.

Opportunities for large volume sales to the Chinese aroma chemicals industry

1) Sassafras oil

Sustainably produced sassafras oil offers a good prospect for sale by new suppliers to the Chinese aroma chemicals industry.

The heliotropine and PBO manufacturers in China consume some 2,000 tonnes / year of sassafras oil and they are dependent on a progressively declining supply of sassafras oil obtained by destructive felling of wild sassafras trees in China and in neighbouring Asian countries.  This supply problem was discussed in detail at the IFEAT Cochin conference last year in a lecture by Mr. Huang Zong Liang.  His conclusion was that a guarantee of continuing adequate supply of sassafras oil is dependent on developing sustainable production on a large scale from the Brazilian plant Piper hispidinervium inChinaand elsewhere in the world.

At the IFEAT 2000 conference in Florida, Mr. Thomas Plocek described the results of successful trials here in South Africa during the late 1990¡¯s with Piper hispidinervium.  The project demonstrated that good yields of a safrole rich oil could be produced.  However, this pioneering work appears to have not yet been taken to the commercial production stage.

Therefore, I suggest that essential oil producers here in Africa with suitable climatic conditions seriously consider developing production of Piper hispidinervium oil for export to China.

2) Eucalyptus citriodora oil

China was formerly one of the two main global producers of Eucalyptus citriodora oil.  However, China¡¯s output has progressively declined from around 1,000 tonnes to 300 tonnes per year because of changes in the choice of trees for planting.

Demand by China¡¯s aroma chemicals industry for Eucalyptus citriodora oil as a source of isolates continues.  Consequently, it is another candidate for production here in Africa for sale to China.

3) Java-type Citronella

A third candidate for supply to China¡¯s aroma chemicals industry is Java-type citronella oil.

Currently, the Chinese industry has to import around 200-300 tonnes per year of this oil because of shortfalls in domestic production.  If domestic supplies decline further, imports of Java citronella oil will increase and this will provide opportunities for African producers.

4) Clove Leaf Oil

Clove leaf oil is also imported by China¡¯s aroma chemicals industry for use as a raw material for the isolation of eugenol, which is further transformed into nature identical vanillin.

Additionally, there is a demand for this oil as an ingredient of fragrances and medicines.

Recent import volumes of clove leaf oil have been around 10-15 full container loads (FCLs), i.e. 150 - 250 tonnes per year.  The major suppliers to China are Madagascar and Indonesia.

Opportunities with other oils

The potential for export to China with other oils lies mainly with those employed as flavour ingredients and particularly with the citrus oils.

China¡¯s consumption of citrus oils is growing and supplies are predominantly imported, since citrus fruit production in China is mainly destined for the local fresh fruit market.

Orange oils and orange terpenes are by far the largest import items and in 2005 the combined volume was around 400 FCLs, i.e. over 5,000 tonnes. Orange oil is mainly employed as a beverage flavour while the orange terpenes are used mainly for the isolation of L-carvone, a product for which China today is the dominant global origin.

Lemon, lime and grapefruit oils also are imported by China and, as yet, there is no local large-scale cultivation of these fruits.

African citrus oil producers should look to the opportunities presented by China¡¯s market.

Oils with limited potential

The opportunities with fragrance essential oils in China are limited, since consumer fragrance products on the domestic market are mainly formulated from low price synthetic ingredients.

Nevertheless, modest quantities are imported of the oils of ylang-ylang, cananga, petitgrain, cinnamon, Juniper berry, chamomile and davana.

Having listened to reports in Tuesday¡¯s lectures of production developments in the region, it is important, however, to note that there is certainly no prospect for export to China of geranium and lavender oils:

• China is the world¡¯s major producer and exporter of geranium oil, around 80 - 120 tonnes annually.

• Lavender oil production for export by China is growing steadily and in the recent period reached 40-50 tons per year.

Considerations for exports to China

20 years ago when China has just opened its market, import taxes were very high.  F&F compounds were subject to the highest duty, 45%, the rate for essential oils was 20% minimum and 15% for aroma chemical.

Following China¡¯s entry to the WTO in 2001, most import taxes have gradually decreased a few times year by year.

Today, China¡¯s import duties are as follows.

However, the exact duty is depended on the Harmonized Code for each product used for importing.

The common necessary documents for China import are as follows:

       1) Invoice and Packing List

       2) Certificate of Origin and Certificate of Quality and Quantity

       3) Sanitary Certificate

       4) Phytosanitary Certificate

       5) Certificate of Fumigation (if packing are wooden material)

To conclude, China¡¯s growing market offers prospects for sales by African essential oil producers, provided that there is a focus on those items that are in the greatest demand, particularly feedstock consumed by China¡¯s aroma chemicals industry and with citrus oils.