Market undergoing various changes

The 128th?Weekly

It is an indisputable fact that it is now a weak downstream procurement market with some dealers have even started to sell at a loss to prevent further loss, worrying the repetition of what happened this March and April. Yet what needs to be considered is then market situation and prices level was completely different.?

1

The trend of future market depends on multiple factors, including judgement and confidence. This has been evidenced by amino acid market. Lysine, threonine and methionine are trending divergently.

The market of 70% L-lysine sulfate, which was a hot sale earlier, has started trending downwards with the price increase and delivery improvement.?Last week, dealers lowered their sale price, and so did the factories, almost to the distressed level within a short period of time. This has hit the market confidence hard, especially that of the dealers. Some have been selling products at a loss. Delivery of 98.5% lysine HCL is strained. The number of overseas orders and the prices of 98.5%?lysine HCL have remained high, while there are signs showing a softening 98.5%?lysine HCL market as well.

Yet at the same time, quotations from EPPEN and Meihua remain strong, benefiting from the well performing China and overseas markets in terms of both sales and delivery. Meihua has had its new production line ready and has put it into trial production as planned.

2

One leading manufacturer, who has kept price low for over 1 year, has offered high quotations of RMB8,900/ton, RMB13,000/ton, and RMB13,000/ton respectively for 70% L-lysine sulfate, 98.5%?lysine HCL and threonine in South China in December, which are much higher than before.?

This week, another leading manufacturer signed contracts for thousands of 70% L-lysine sulfate at RMB9,000/ton.

A large proportion of the sales of the two manufacturers are to overseas markets and in China market they are the supplies to leading feed processors. These are the sources of their confidence.

The other amino acid manufacturers are facing small-and-medium size enterprises and a heavily overseas dependent OEM market. Those small-and-medium size clients do business in a way that they purchase large amount when price is low, less purchase or no purchase when price is high. This has been challenged under recent market situation and they hope to ensure sale by drastic price reduction. In fact, such reduction has brought down sale as purchase is more when price goes up while less when price drops (“chasing rise but not the fall”). Downstream is especially cautious with purchasing when price falls. According to the statistics of mobaobuy.com, the volume and value of transactions of lysine and threonine this week (week 50) decreased by 39.6% and 46.8% respectively.

The production of Sumitomo has been postponed due to production line maintenance. The spread of the news has boosted the purchase of methionine. Driven by expected tight supply, transaction and price of methionine on mobaobuy.com have increased by 30.0% and 1.28% respectively.

3

Downstream breeding industry has been sluggish and fluctuating. Corn price trends in Northeast and North China have seen differences. Price in Northeast is strong as farmers are cautious with selling and that in North China is softened as large supply of corn available in the market.

The spread of the pandemic in Heilongjiang, Inner Mongolia and Zhejiang provinces has produced more impacts. The market will have to deal with more control measures and logistics disruptions.

It’s still uncertain that products for orders in hands will be delivered in time or not. Leading producers will prioritize to satisfy those leading processors, ahead of the small-and-medium size clients via distributors. Under such situation, small-and-medium size clients need to pay close attention to delivery from the manufacturers, as well as the pandemic and weather change.?

4

Compared to amino acid, the oversupply of vitamin hasn’t had fundamental change yet. The 2021 China Vitamin Industrial Summit has been delayed because of the pandemic, which may be moved to next March. The influencing factors this week are Shangyu, Shaoxing, where there has been 105 cases confirmed, and Hangzhou, which has been affected by those cases.?

It’s understood that Shangyu NHU Bio under NHU is shutting down production. There have been people wanting to know the products and status of the factory. Table 1 is the major vitamin producers located in Zhejiang province.

Table 1 Vitamin producers, products and status in Zhejiang province

There are over two weeks until the new year, 2022. Different factors are expected to show up and affect the market and its trend in the coming weeks.?