Ingredient markets are in disarray as legislative, production, and supply chain disruptions impact pricing and buying patterns.
Prices have skyrocketed for some markets, such as lysine, and held steady-to-firm in other markets. We have pulled together a summary below our mailing list signup form of the critical issues to help you keep on top of these developments and what they may mean for you.
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So, what’s been happening?
Supply chains globally remain snarled. Although freight rates dropped during China’s Golden Week holiday, worsening port congestion and delays on the US West Coast are keeping Asia-US freight prices extremely high. Importers have raised concerns that shipments not already moving will not make it before year-end.
On 12 October, there were 143 ships waiting at San Pedro Bay in California: 61 at anchor and 82 at berth representing more than 500,000 TEU of product sitting on the water waiting for a terminal. Of those, 86 were container ships. Waiting time at ports has been estimated at up to four weeks, in addition to the delays in product leaving its port of origin.
Sellers globally are cautious about offering spot material while they assess the impact of accumulated delays and prioritise deliveries to existing contract customers.
China Power Shortages
Most Chinese ingredient producers have indicated there has been at least some impact on their operations from a combination of the Chinese government’s dual energy consumption controls and the recent power shortages resulting from high raw material costs.
This has resulted in complications to already strained global supply chains, in turn driving up global feed additive prices.
China is in the midst of a power crisis as a lack of coal supplies, stricter emissions standards, and strong demand from manufacturers and industry have pushed coal prices to all-time highs and prompted widespread usage restrictions.
The power issues have triggered factory shutdowns and affected production in the world's second-largest economy and a critical feed ingredient-producing region.
Goldman Sachs said in a note on 28 September that as much as 44% of China's industrial activity has been affected by power shortages.
The energy crisis takes place against a backdrop of ongoing efforts by the Chinese government to move the country towards carbon neutrality by imposing strict energy consumption targets.
How are these crises impacting different feed additives?
The supply of several vitamins is tightening as they are manufactured in some of the Chinese provinces most heavily impacted by power restrictions.
In addition, BASF Animal Nutrition informed customers this week that it is still not ready to supply commercial volumes of feed-grade vitamin A 1000. Instead, the company wants to build up its stock levels and ensure safe and stable supply over an extended period.
Lysine prices have skyrocketed in the US, rising by 50% in one week and nearly 90% in a month. A series of supply chain issues has prompted market panic and higher price indications.
Among the supply chain issues affecting the Americas markets was a large shipment of lysine, threonine, and trace minerals damaged during Hurricane Ida, leading the distributor to declare force majeure on the amino acids. This came when supply was already tight in the US and buyers were looking for Q4 cover.
Several buyers have been in the market to cover the rest of the year, while others are aiming to cover much of 2022 out of concern that Chinese supply won’t make it to the US amid the power disruptions and supply chain constraints. As a result, sellers are changing prices multiple times.
“I’ve had my amino pricing change on me 4-5 times over the past 48 hours, and the numbers I got last night are only valid today,” a North American buyer said.
“The market is extremely nervous right now due to energy restrictions, some items are increasing basically by the hour, so one needs to watch very carefully at this moment,” a European trader said.
China's ban on phosphate exports has caused concern about the benchmark Q4 phosphoric acid contract price, which has yet to be agreed. Europe feed phosphate contract prices remain largely unsettled for Q4. Early indications show feed phosphate prices rising by €100/tonne over Q3 contracts. US prices for Q4 have moved up by $110/short ton over Q3.
Copper sulphate continues to follow the trends in copper metal pricing. High sulphur and sulphuric acid prices are causing some buyers to look at non-sulphate minerals wherever possible.
How are you being affected? Or your customers, or suppliers? We’d love to hear from you, contact us by emailing firstname.lastname@example.org.