Market News: China Visit 2017


With severe ongoing supply issues, Treatt took the opportunity to visit suppliers across China. Much of the agricultural land there is owned by the Government, with each family allocated a plot. The size of this plot depends on the province. In Kunshan, for example, each farmer has 660m2 with which they can do whatever they wish, grow, process or even rent out. The Government incentivise farmers to plant cash crops like rice, fruit or vegetables. However, harvesting these is still labour intensive due to the nature of the work and also the terrain being unsuitable for heavy machinery.

Harvesting some essential oil bearing crops can require very unusual and not always safe working practices. Eucalyptus and cassia grow high up in the mountains and harvesting involves climbing trees, some of which can reach up to 55m tall, without safety ropes to access the leaves. The migration of the younger generation to the cities has been an evolving threat to the agricultural sector for many years now with the rural working population now predominantly over the age of 50. Those doing jobs in the city, such as delivering fast food, can earn RMB 8 to 10k (USD 1,200 to 1,500) per month which is a lot more appealing than the RMB 2 to 3k (USD 300 to 450) for agricultural work such as harvesting raw materials required for essential oil production. The Government has started to intervene to try and change this trend by increasing the minimum wage paid to agricultural workers by 10% with the expectation being that this will continue year on year in large increments.

Reports of the Environment Ministry clamping down on pollution from factories are true. Many facilities, across all industries, have been closed or told to halt production indefinitely and face heavy fines or even jail sentences should they not conform. Many small, rural distillation units which used to process raw materials to crude versions of the essential oils we know have had to cease operating.


However, some of the more affluent companies have built larger, more centralised sites where farmers and collectors can bring the raw materials for distillation to crude oil. Some of these newer factories have been given temporary permission to use spent bio mass (post distillation plant material) as fuel, while they prepare their facilities to run on gas, but are only allowed to process at certain times when given the go ahead by the Environment Ministry who closely monitor the pollution levels. The yield achieved using the bio mass is not as good as that which was achieved using coal. This is causing delays and irregular availability and of course pushing up the final price of essential oils.

When taking all the above in consideration it seems that the days of China being seen as the origin of choice for price-sensitive buyers is soon to be a thing of the past, if not already as we have started to see in the last 12 months.