CCM: Intense market competition: Nenter to launch 20,000 tonnes annually VE project 09-08-2016

On 1 Aug., 2016, Fujian Guanfu Modern Household Wares Co., Ltd. (Guanfu Household, stock code: 002102) announced that its wholly-owned subsidiary, Nenter & Co., Inc. (Nenter), plans to construct a 20,000 t/a vitamin E (VE) project, given the growing market demand and the company’s production advantages in VE intermediates.

Source: Baidu

Details of the project are as follows:

  • Executor: Nenter and Nenter Shishou Co., Inc.
  • Construction site: High-tech Development Zone, Jiangzhou City and Dongsheng Town, Shishou City, Hubei Province
  • Production scale: a designed production capacity of 20,000 t/a, the sites are to be equipped with plants for VE synthesis, drying, pulverizing, and isophytol synthesis
  • Construction Period: ≤10 months after administrative approval is obtained
  • Total investment: USD86.91 million (RMB576 million), mainly from Nenter’s accumulated undistributed profits and bank loans

Based on data about the current domestic VE market, the new project is expected to contribute an annual revenue of USD209.73 (RMB1.39 billion) and annual net profit of USD45.26 million (RMB300 million), payback period (construction period included) for the project is around 3-3.5 years.


Nenter is a leading producer of 2,3,5-trimethylhydroquinone (one of the key intermediates for VE), and has a production capacity of 8,000 t/a. Thanks to its advanced production technologies, the company has developed cooperation with domestic VE producers and realised rapid growth – net profit rose by 8 times between 2012 and 2015.


However, Nenter is confronted with challenges in challenges in realizing full production capacity and furthering business development, as most leading VE producers have gradually realised independent production of 2,3,5-trimethylhydroquinone. According to CCM’s research, Zhejiang Medicine Co., Ltd. (Zhejiang Medicine) and Zhejiang NHU Co., Ltd. (Zhejiang NHU) are already capable of self-supply. Chongqing Southwest Pharmaceutical Co., Ltd. (Southwest Pharmaceutical, former subsidiary of PKU Healthcare Corp., Ltd.) and Jilin Beisha Pharmaceutical Co., Ltd. (Jilin Beisha) are also able to produce 2,3,5-trimethylhydroquinone.


Therefore, to improve profitability, it’s vital for Nenter to expand into the VE market and become a supplier to feed additive enterprises at home and abroad.


“This VE project is an extension of the 2,3,5-trimethylhydroquinone supply chain,” said Guanfu Household, “By taking advantage of this production line, Nenter can lower its production costs and improve more efficiently utilize its production facilities.”


Notably, Nenter has successfully developed a new synthesis technique for isophytol (another important intermediate for VE) and is conducting pilot production at present. “This pioneering technique has a practical reaction mechanism and technical route and the production process is safe,” commented an expert. The new technique will guarantee Nenter’s safe production of VE and lower production costs.


Nenter's financial performance, 2012-2015

Source: Fujian Guanfu Modern Household Wares Co., Ltd.


Nenter’s new VE project is planned to be put into production in H1 2017, and will have a marked impact on the domestic VE market:

1. Market competition to be intensified

Since 2013, Nenter has provided VE producers with 2,3,5-trimethylhydroquinone and 2,3,6-trimethylphenol, which eases access to VE industry. As a result, competition among producers has become increasingly intensified and the market price of VE has stayed low due to oversupply.

Under these conditions, a number of small- and mid-sized enterprises suspended production or even withdrew from the market. In H1 2016, the domestic VE industry showed high production concentration: main suppliers included Zhejiang Medicine, Zhejiang NHU and Jilin Beisha.

It can be predicted that, after the large-scale VE project is put into production, Nenter will again break the pattern of high production concentration, and may even challenge the existing leading VE producers.

2. VE price likely to decline

The domestic market price of VE has showed an upward trend since the beginning of 2016. According to CCM’s price monitoring, the market price of VE reached USD13.58/kg (RMB90/kg) in July, more than two times the figure in Jan. However, the transaction price was somewhere around USD12.07-12.82/kg, according to some trade sources.

The price may remain high in H2 2016. At present, Zhejiang Medicine and Zhejiang NHU have suspended production due to facility maintenance and the coming 2016 G20 Summit. The two leading producers have also suspended the offering of quotations and may raise their sales prices again.

In fact, Zhejiang NHU and Jilin Beisha have raised their quotations for VE several times this year, which has supported the rise in market price. On the contrary, Zhejiang Medicine increased supply to prevent excessive price hikes, for it desires the market price to remain at a relatively reasonable level and a high price may stimulate small-scale producers to resume production and competition will intensify.

It is said that Southwest Pharmaceutical is likely to resume VE production in H2 2016, and may be attracted by the rising VE price. Yet, it has already missed out on large opportunity. At present, many producers have large inventories. Even if it gets back to production in H2, the company will face great competition.

Moreover, Nenter is likely to win a share of the domestic VE market by taking advantage of its low production costs and large production scale. Therefore, the market price of VE may not continue rising, and may even decline after Nenter’s new project is put into operation smoothly in 2017.


Nenter, founded in May 2010, is mainly engaged in the R&D, production and sale of pharmaceutical intermediates, such as montelukast intermediates, 2,3,5-trimethylhydroquinone, 2,3,6-trimethylphenol and 2,5-dimethylphenol.


In Aug., 2014, the company was fully acquired by Guanfu Household for USD271.59 million (RMB1.80 billion), after which Nenter’s registered capital increased to USD33.19 million (RMB220 million).


Guanfu Household is a producer of ceramic and bamboo house wares in China. In the past two years, to realise business transformation, the company has gradually divested itself of existing main businesses and broken into the pharmaceutical industry through asset acquisition.


Nenter's basic VE production route

Source: Nenter & Co., Inc.

This article comes from Vitamins China E-News 1608, 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.


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