The first half of 2023 was marked by inflation, oversupply, and declining spot prices in feed additive markets. Nevertheless, starting in August, amino acid prices began to climb higher due to a tightening of global supply expected in Q4. For vitamins, cautious buying continues, and vitamin prices have not firmed like amino acids.
While speaking at the 2023 Feedinfo Summit in Vienna, Heather McGuire Doyle, Senior Analyst at Feedinfo, described how supply, demand, and prices have evolved during the first half of the year, shifted in August, and what lies ahead for Q4 and into 2024.
Supply and delivery timing and costs have improved following the disruptions caused by the COVID-19 pandemic and the consequent supply chain crisis. During this period, resellers and buyers stockpiled and adopted a 'just-in-case' approach, but the landscape has evolved, and destocking has taken longer than anyone imagined, Doyle explained.
“With resell and warehouse supply ample, buying trends have been tempered by caution driven by concerns about inflation and demand. There is a distinct focus on minimising stockpiles of both raw materials and finished goods,” Doyle said. “This has not changed much through the year, especially in vitamin markets.”
“While price increases have been observed in some areas, overall low profitability in the livestock sector – coupled with uncertainty surrounding crop prospects and harvest prices – is causing buyers to approach the market with hesitancy, and while we see an improvement in amino acid demand, caution still prevails in some feed additive markets, particularly vitamins,” she added.
Doyle said the market was very quiet during the first half of the year but suddenly began to “wake up” in August.
She attributed this to the peak demand season in China coming earlier and high soybean meal prices impacting amino acid demand. High soybean meal prices tend to cause buyers to consider using more amino acids in their feed formulas to compensate for the lost protein content.
“The peak demand season in China, typically occurring in October/November, has seemingly started earlier this year and is expected to extend into November, as market players react to current conditions and prepare for upcoming festivals, including National Day, Mid-Autumn Festival, New Year's Day, and Spring Festival,” Doyle said.
Amino Acids
Amino acid manufacturing is primarily concentrated in China, although there is some production in the Americas and Europe. CJ has notably expanded its capacity in the Americas, while Fufeng's attempt to open a plant in North Dakota was met with opposition from activists in 2022.
“The global methionine market is undergoing a dramatic transformation. The market, which faced inflation, oversupply, and declining spot prices earlier this year, is now experiencing a resurgence in demand and pricing,” Doyle said.
Global methionine prices exhibit regional variations, with the highest prices found in the US due to factors such as the US-China trade war and anti-dumping investigations adding tariffs to the import prices. However, with shipping cost reductions and improved shipping times, Doyle said that methionine from China and Singapore especially has come into the US market since late 2022, exerting pressure on local spot prices.
Earlier this year, global methionine prices experienced significant declines attributed to inflation concerns, cautious buying, and the anticipation of new production capacity. Bird flu and swine disease outbreaks further dampened demand in various markets.
Recent developments have led to price increases in Europe and China, driven primarily by tight supply. Producers, buyers, and traders across the board have reported low stock levels, with supply constraints persisting.
Regarding methionine production, global capacity is distributed across Europe, East Asia, North America, and Southeast Asia, with no single region holding a dominant position, Doyle explained.
Traditional manufacturers, including Adisseo, Evonik, and Novus, have historically dominated capacity. However, major Chinese producer NHU is set to open a new DL-methionine unit in H2 2023, further altering the landscape.
Vitamins
Vitamin A prices have fluctuated, with excess supply and low demand contributing to price declines in all regions during the first half of the year.
“High energy costs and inflation have challenged European consumption, but a global recovery in consumption is expected to improve operating rates starting from 2023 onwards,” Doyle said.
Vitamin E markets have faced slow demand, with warehouses remaining full and destocking taking longer than anticipated.
Vitamin B2 experienced a challenging market situation in the year's first half, marked by poor demand, declining volumes and prices, and challenging business conditions.
“Low stocks ahead of summer maintenance contributed to price increases in June, especially in China,” Doyle said.
Minerals
Copper sulphate spot prices have closely mirrored copper metal market trends, with European demand showing a 35% decrease from the feed sector. Caution prevails among buyers navigating inflation and demand concerns.
“In the US, spot buyers seem to favour truck-by-truck purchasing, with some waiting until the last week of the month to purchase the following month’s supplies,” Doyle said.
Feed phosphate prices experienced a significant slump in the year's first half, particularly in Brazil.
“Supply concerns initially emerged with the Russia-Ukraine war but were alleviated in 2023 as Russian material continued to flow, Chinese exports became available to the rest of the world, and global demand remained weak,” Doyle said. “However, production issues at Lifosa in Lithuania have persisted for months, and the facility is now in the mothball process.”
