Currently, the Chinese VA market is
rebounding and the market price of VA is expected to continue to rise. This is
mainly due to tight supply, price rises instigated by producers and dealers,
the booming downstream farming industry, the domination of production by a few
giant players and limited production because of environmental protection
pressure.
Source:Bing
Currently, the Vitamin A (VA) market is
rebounding after more than a year long fall, and the price of VA is expected to
continue to increase in H2 2016, according to industry insiders.
Short supply of VA globally
In Dec., 2015, Royal DSM (DSM), a giant
global player in the vitamin industry, announced that it had suspended the production
of VA in its factory in Switzerland in order to perform maintenance. It planned
to resume production in Feb., 2016. This suspension of production has led to a
reduction in the supply of VA globally.
The production of VA was also influenced by
the short supply of citral, a key intermediate of synthetic VA. At the end of
2015, the Malaysian citral factory belonging to BASF, a leading citral supplier
which accounts for more than 60% of the global market share, failed to begin
production as scheduled. Besides, some raw materials in Adisseo and Xiamen
Kingdomway Group Co., Ltd. (Kingdomway) are acquired from BASF. This aggravated
the short supply of citral globally.
In early 2016, the overall domestic output
of VA is not high. This is mainly because of the production suspension during
the Spring Festival, as well as stricter environmental protection policy
implementation.
VA price raised by producers and dealers
Taking advantage of DSM’s production suspension, successive VA producers have
raised their price quotations of VA.
On 20 Jan., 2016, Zhejiang NHU Co., Ltd.
(NHU), a leading VA enterprise in China, took the lead in raising prices,
raising quotations of VA by 80%. Following this, Zhejiang Medicine Co., Ltd.
(Zhejiang Medicine) also raised its VA price quotation.
On 3 Feb. BASF, an international giant
player in the industry, announced it was raising the price quotation of VA by
20%.
At present, in March, it has been said that
Xiamen Kingdomway Group Co., Ltd. (Kingdomway) has raised its price quotation
of VA to USD38.23/kg (RMB250/kg).
These measures pushed up the domestic
market price of VA, which has continued to rise. In Feb. the average market
price of domestic feed grade VA (500,000IU/g) reached USD30.5/kg (RMB200/kg),
up by 25% MoM, according to CCM price monitoring.
At the end of Feb. a sales person at
Zhejiang Medicine predicted that “The market price of VA will continue its rise
for a while.”
Driving by profit, dealers also raised the
price of VA.
“Currently, dealers are increasing their purchasing amount of VA to stock up.
They tend to sell the products at a very high price so as to gain huge profit,”
said a sales manager from NHU.
The booming downstream farming industry
Stimulated by the rising price of live pigs and the high profitability of
farming, farmers are enthusiastic about raising live pigs, although currently
stocks of domestic live pigs are at a record low. Besides this, some leading
domestic feed enterprises, such as Beijing Dabeinong Technology Group Co., Ltd.
and New Hope Liuhe Co., Ltd., desire to enter the live pig farming industry.
Now, large-scale live pig farming in China
is developing rapidly and is expected to steadily drive up the demand for VA
from the feed industry.
At present, 70% of the demand for VA is
from the downstream feed industry. However, the cost of VA only accounts for
about 1% of feed production cost, therefore, the rise in the price of VA won’t
change much for the price of feed. Usually, VA has a short shelf life which
doesn't allow for feed producers to preserve their stock for too long. After
the 2016 Spring Festival, the domestic feed industry has ushered in a peak
period for stocking VA. As demand increases, the price of VA is expected to
continue its rise.
Production dominated by a few giant players
At present, in China, only three VA enterprises have achieved large-scale
production, namely NHU, Zhejiang Medicine, and Kingdomway. The total capacity
of these three enterprises accounts for 40% of the global market share. The
remaining 60% is taken up by 3 other international enterprises, namely DSM,
BASF, and Adisseo. Since the industry is highly concentrated and
technologically demanding, it is easy for these enterprises to ally with each
other and continue to push up the price of VA, also aided by a stable supply
structure due to a lack of new competition.
Production limited by environmental protection pressure
Under the increasing pressure of environmental protection, new capacity of VA
is limited, and the existing capacity of some enterprises is likely to decline.
The G20 Finance Ministers and Central Bank
Governors’ Meeting is to be held in Hangzhou City, Zhejiang Province in Sept.,
2016. At that point, polluting enterprises in the Yangtze River Delta Region,
where Zhejiang Medicine and NHU are located, will be suspended for a while.
This will precipitate a further drop in the operation rate of VA enterprises,
and is predicted to further increase the price of VA.
Market price of feed grade Vitamin A (500,000
IU/g) in China, Oct., 2014-Feb., 2016
Source: CCM
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Tag: Vitamin A