Demand is a Fundamental Factor, but Supply Conditions Still Affect Market Trends

Effamall.com 26 Jun, 2024

Increased Transactions Do Not Necessarily Indicate an Increase in ?Downstream Demand

Compared to the previous week, inquiries and transactions on Mobaobuy.com witnessed a surge of 115.3% and 122.0%, respectively this week, with the platform’s conversion rates increasing to 93.8%, up 4.9%.

In contrast to the significant plunge last week, inquiries and transactions on the platform this week increased significantly. However, the market did not experience such dramatic fluctuations. This notable shift on the platform is primarily attributed to ongoing supply-side news, changes in quotations, contracts, and deliveries amid a continuous decline in feed and farming demand. Transactions concluded by traders on Mobaobuy.com this week accounted for over 50% of the total trading volume, showing a greater impact in the market circulation section.

This week, Threonine and 98% L-Lysine HCL were the most frequently inquired products on the platform, with Mono-Dicalcium Phosphate (MDCP) being the most traded product, There was also a strong reluctance to sell Threonine in the market.

Additionally, Mono-Dicalcium Phosphate (MDCP), Threonine, Corn Gluten Meal, Tryptophan, DL-Methionine, and Valine were among the products with 100% conversion rates, and 98% L-Lysine HCL achieved a conversion rate of 87%.

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Low Operating Rates of Downstream Feed Manufacturers and a Three-Month Consistent Decline in Corn Consumption Proportion

To further promote the implementation of our digital cloud factory system for feed production and operation among our partners and discover ways to empower feed companies to navigate risk control through digital technologies when selling to farmers, we visited a few feed manufacturers engaging in swine, poultry, and aquatic feed earlier this week. According to our findings, while aquatic feed companies are operating at full capacity, poultry feed companies are currently operating at insufficient rates, and swine feed companies are running well below capacity, with some operating only 1 to 2 days a week.

This production status began in mid-to-late April and has continued until now.

On June 18th, 2024, the Animal Husbandry and Veterinary Bureau, under the Ministry of Agriculture and Rural Affairs, and the China Industry Association jointly released an overview of China’s feed production in May 2024. Calculated based on sample enterprises’ related data, in May, China’s industrial feed yield totaled 25.13 million tons, up 3.7% month-over-month but down 7.5% year-over-year. April saw a 1.5% dip month-on-month and a 7.9% drop year-on-year, with the national industrial feed output at 24.23 million tons. During these two months, there have been month-on-month and year-on-year downtrends in ex-factory prices for main compound feed, concentrated feed, and additive premix feed products.

It is noteworthy that the corn consumption in compound feed produced by feed companies accounted for 36.5% in May 2024, down 2.2% year-over-year. This marks the third consecutive month of decline after reaching 41.1% in January and February 2024. The increasing proportion of other energy materials consumed, such as wheat, will have a significant impact on downstream demand for Threonine.

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Weak Demand and Stable Procurement

The persistently weak demand from end users, coupled with stable purchasing activities, remains a significant characteristic of the market this year.

Despite persistently subdued demand from the downstream industry over the last two months, unlike in previous years, end users have maintained significantly lower inventory levels and made purchases based on production needs rather than prices. Consequently, the procurement rhythm has stayed relatively steady this year, unaffected by major price hikes or drops.?

However, stable procurement is contingent on prices being within the reasonable range perceived by buyers. After some products experienced recent price increases, demand and transactions weakened.

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Quantities and Prices Cannot both be Sustained in the Long Term

Recent changes in market trends have affected certain amino acids and vitamins, with significant shifts observed in Vitamin B1. Over the past eight months, Vitamin B1 has seen consistent price increases after hitting a price bottom for nearly ten months. These substantial and prolonged price hikes have been unprecedented, even after manufacturers experienced a nearly one-year production suspension following the explosion accident in Xiangshui County, Yancheng City, Jiangsu Province, in March 2018. The production dates of Vitamin B1 products currently received by end users may provide insight into the underlying factors driving these changes.

Hot Topics at the CPHI Exhibition: Vitamin E and Vitamin D3

During the CPHI Exhibition in Shanghai this week, many industry insiders convened to discuss key topics, with a significant focus on the development of the Vitamin B1 and Vitamin B6 markets, the potential trajectory of Vitamin E and Vitamin D3 prices, as well as the duration of the current tight supply of 98% L-Lysine HCL.

Regarding Vitamin E and Vitamin D3, it is advisable to observe the trend Vitamin B1 has undergone over the past six months. Meanwhile, the following three questions merit contemplation.

• What are the current inventory levels of Vitamin E and Vitamin D3 held by end users and traders?
• Are manufacturers prepared to continue supplying Vitamin E products produced in the current period or even up to the end of 2024, by June 2025?
• How resilient are end users in enduring price fluctuations?

Undoubtedly, monitoring changes in upstream manufacturers’ operating rates and their long-term and short-term strategies remains crucial.

Given the current conditions, the likelihood of a decline in Vitamin E prices in the coming months is low. However, the potential for an increase depends on the quotations and control capabilities of upstream manufacturers. While there is upward potential, the extent remains uncertain due to unforeseen factors that may arise. Achieving the bullish price levels speculated by many and determining the sustainability of such increase is challenging. Nonetheless, a stable or upward pricing trend may persist until at least November, spanning nearly half a year. This projection assumes no sudden price spikes that could lead to a sharp plummet.

The dynamics of the Vitamin D3 market seem more manageable from the supply side, with upstream sentiment dictating prices in light of ample stock availability. The evolution of the Vitamin D3 market remains ongoing, particularly with the recent surge in popularity of plant-based cholesterol-derived Vitamin D3, reminiscent of the trend seen with bio-based astaxanthin in previous years. While the CPHI Exhibition may signal the pinnacle of plant-based cholesterol, its momentum hinges on the strategies and stances of established leading Vitamin D3 enterprises.

Next week, we will delve into market trends for Lysine and Threonine.

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