CCM: Will up-going VA quotations continue in H2 2016 05-31-2016

On 9 May, 2016, Zhejiang NHU Co., Ltd. (Zhejiang NHU) raised its sales price of 500,000 IU/g feed grade vitamin A (VA) to USD55,760/t (RMB360,000/t).



                                                                              Source: Baidu


According to CCM's research, this was mainly because:


1. Domestic supply of VA is likely to get tight in the coming period.

2. So far, the transaction price of VA has reached around USD46,460-48,010/t (RMB300,000-310,000/t) in domestic market, which is higher than the company's previous quotation.

 

Prior to this, in March, Zhejiang NHU up-regulated its VA sales price to USD45,690/t (RMB295,000/t). Obviously, Zhejiang NHU, a leading Chinese VA producer with relatively strong voice in pricing VA, holds an optimistic attitude towards the development of VA market. This price up-regulation may continue boosting market price of VA.

 

Since early 2016, Zhejiang NHU has raised its quotation for VA several times. Other mainstream VA producers, like Zhejiang Medicine Co., Ltd. (Zhejiang Medicine) and Xiamen Kingdomway Group Co., Ltd. (Kingdomway), and leading dealers responded and raised their sales prices, making the purchasers believe in the short supply of VA.


This boosted the market price of VA. According to CCM's price monitoring, in April 2016, the market price was averaged at USD49,560/t (RMB320,000/t), up 100% over Jan.

 

Producers benefited a lot from this rise. For instance, Zhejiang NHU predicted its Q1 2016 net profit to surge by 75%-95% to USD21.80 million-24.29 million (RMB140.75 million-156.83 million), thanks to the rise in sales price of VA.

 

                        Monthly market price of vitamin A (500,000 IU/g feed grade) in China, Jan. 2015-April 2016


                                                                                    Source: CCM




Domestic VA producer


Since the end of April 2016, the overall market price of VA has become stable gradually, for:


1. Dealers and independent distributors, who still have inventory, quote lower prices than producers.


2. As of 12 May, except Zhejiang NHU, the other two top VA producers, namely Zhejiang Medicine and Kingdomway, haven't responded and continued raising their quotations. In fact, according to CCM's research, some sales persons in producing enterprises and dealers continue taking a “wait-and-see” attitude towards the trend of VA market.


At present, the top 3 VA producers are all in normal production. Yet, the supply is getting tighter (or the producers cut down their trading volume).


In the first half of May, there are gaps between actual transaction prices: some were set high in new orders while some remained low at around USD44,920-46,460/t (RMB290,000-300,000/t).


Prior to this, dealers and independent distributors expected the VA market price to go up and purchased large amount of VA from producers at a relatively low price. Thus, they can quote lower prices than producers currently. However, as their inventory is running down, they have to accept the high quotation in new orders (often in small trading volume).


Moreover, large-scale feed makers, who have small inventory of VA, often prefer to purchase from VA producers at preferential prices. This is favorable for leading VA producers' price regulations.

 

Multinational producer


According to CCM's research, although BASF's vitamin plant in Shenyang City keeps normal production of VA, its supply to clients is tightened.


Moreover, BASF's citral (raw material for VA) plant in Malaysia failed to be put into production on time by the end of 2015 (projected to be postponed to 2017). This will intensify the short supply of citral in the global market. Chinese VA producers relying on imported citral may confront the risk of short supply.


Yet, "Supply of raw materials has small influence on that of domestic VA," some insiders commented to CCM.


Notably, DSM has provided little of its VA to China and thus has limited influence in domestic market. And Bluestar Adisseo Company withdrew from China's VA market.


Given all these, Zhejiang NHU, Zhejiang Medicine and Kingdomway are the leaders in domestic VA market.

 

Global vitamin A production distribution by capacity, as of May 2016

Note: Zhejiang Medicine stands for Zhejiang Medicine Co., Ltd.;

Kingdomway stands for Xiamen Kingdomway Group Co., Ltd.;

NHU stands for Zhejiang NHU Co., Ltd.;

Adisseo stands for Bluestar Adisseo Company.

Source: CCM

 

It is hard to predict the domestic VA market price to go up or down in the coming period. Yet, in 2016, the oversupply will certainly be largely eased and the market price of VA is expected to keep high, given the following factors:


1. In the short run, there will be few new VA producers due to the complicated production technology and thus the tightening supply won’t be relieved.

 

As of the first half of May, Zhejiang Medicine Changhai Biological Company's newly-constructed 1,000 t/a VA (2.8 million IU crystal) project has been put into pilot production. Yet, due to the relocation of equipment and production personnel training, it may not go into production within 2016.


2. In Sept. 2016, the G20 Summit will be held in Hangzhou, Zhejiang Province. During this period, polluting enterprises in the Changjiang River Delta region (Zhejiang NHU and Zhejiang Medicine are located there) are required to suspend production for around 15 days. Thus, in H2 2016, domestic supply of VA may reduce, supporting the high market price.


This article comes from Vitamins China E-News 1605, CCM




About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.


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