China

Vitamin A prices set to continue to soar

By RJ Whitehead

- Last updated on GMT

Photo: iStock
Photo: iStock

Related tags: Supply and demand

After more than a year-long slump, China’s important vitamin A market is finally starting to rebound, with prices expected to continue to grow until the second-half 2016, according to market analyst CCM.

The vitamin A price may keep increasing​,” said Shi Xuejian, chief editor of Vitamin China News​. “In fact, the rising price is mainly due to tight supply and price rises instigated by producers and dealers​.

Also, the booming downstream farming industry and the domination of production by a few giant players help the price keep rising in some way​.” 

Prices began to grow last December when DSM, the Dutch-based vitamin giant, suspended vitamin A production to perform maintenance to a factory in Switzerland. This shut-down subsequently led to a reduction in the supply of the vitamin globally, with production stalled until February this year.

This reduced availability was exacerbated by the short supply of citral, a key intermediate of synthetic vitamin A. 

Taking advantage of DSM’s production suspension, successive vitamin A producers, including Zhejiang NHU, Zhejiang Medicine and BASF, have raised their prices.  

These measures pushed up the domestic market price of vitamin A, which has continued to rise​,” said Shi, “And driven by profit, dealers also raised the price of the vitamin​.” 

Currently, dealers are increasing their purchasing amount of vitamin A to stock up. They tend to sell the products at a very high price so as to gain huge profit​,” said one sales manager from NHU who was not willing to reveal his name.

With large-scale live pig farming developing rapidly in China, demand from the feed industry is expected to steadily drive up demand for vitamin A.

At present, 70% of this demand comes from the downstream feed industry, though the cost of vitamin A only accounts for around 1% of feed production expenses, suggesting that increasing vitamin prices will have little effect on the cost of feed.

Vitamin A usually has a short shelf-life which does not allow for feed producers to preserve their stock for long periods of time. After China’s 2016 Spring Festival, the domestic feed industry has ushered in a peak period for stocking the vitamin, and as demand increases, its price is expected to continue its rise.

Until now, only three vitamin A companies have achieved large-scale production in China: NHU, Zhejiang Medicine and Kingdomway, with a total capacity that accounts for 40% of the global market share. 

The remaining 60% is taken up by global giants DSM, BASF and Adisseo. Since the industry is highly concentrated and technologically demanding, it is easily possible for these enterprises to continue to push up the price of vitamin A, also aided by a stable supply structure due to a lack of new competition.

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