By Karolina Zagrodna, Lydia Ma and Heather McGuire Doyle
26 May 2022 - Vitamin A spot prices across global markets have softened in the first five months of this year as demand remains weak and customers are believed to be well covered. But current and planned production disruptions could change the supply-demand balance and affect prices in Q3, sources have said.
DDP Europe vitamin A 1000 spot price assessments dropped by over 16% between the start of the year and 24 May.
“Indeed, prices are softening even though there are no business transactions. Currently prices are around EUR 58.50-60.00/kg, but could well be that there will be a bigger decline if market gets active and if there are real orders at stake,” said one trader.
A buyer echoed those views, adding: “... the previous weeks have been quite calm, and we haven’t made any major moves in the market since we’re covered quite well for the near future. Here and there we’re locking in some contracts for Q3 but only for small quantities…”
Calm before the storm?
Meanwhile, on Tuesday 24 May, Joerg von Allmen, VP Category Management Fat Soluble Vitamins & Carotenoids at DSM, said that the company will undertake lifetime extension work at its vitamin A plant in Sisseln, Switzerland. The plant will be shut down for nine weeks starting at the end of July.
“To bridge this shutdown, much Vit A-acetate was sent from Switzerland to DSM Xinghuo in China for A-500 formulation. However, production was lost due to the extended COVID lockdown in Shanghai. A global re-allocation of A-acetate was necessary to equitably distribute the pain of the resulting supply gap in Q3/22. Therefore, DSM will prioritize its supply and limit new offers with immediate effect. While the shutdown in Sisseln was planned, the lockdown impact in Shanghai was not and the logistic challenges remain high,” said von Allmen.
Meanwhile, a Chinese producer is planning to start maintenance work on its vitamin A production line from mid-June. The shutdown is expected to last ten weeks. A third vitamin A producer is believed to have been in a seven-week planned shutdown since the second week of April, market sources have said.
“It can also be expected that the very low development of demand and destocking in H1 can turn to the opposite direction as of Q3 as meat prices go up, improved outlook on profitability triggers new placements of animals; consumer demand recovering with end of COVID measures; low inventory could normally trigger a fast turnaround, while availability of cash and labour remains a challenge,” said von Allmen.
US prices in freefall amid good supply
Americas markets were weaker as buyers took to the sidelines in anticipation of lower prices amid poor demand and plentiful supply.
The average North American vitamin A 1000 spot price on 24 May was $58.50/kg DDP US Midwest, compared with $62.50/kg at the beginning of May. Average prices have lost over 23% of their value since the start of the year.
The average South American vitamin A spot price has been around $63.00/kg FOB São Paulo. However, a buyer said offers were available in the low-to-mid $50.00/kg range for Q3 orders.
Vitamin A markets were in freefall, according to one North American reseller, who anticipated that US prices could nosedive during the summer season – which spans from US Memorial Day to Labour Day – assuming supply-demand fundamentals remain the same.
"If supply chains aren't disrupted further, and Americas demand remains weak as end users retreat to only hand-to-mouth purchases, then vitamin A 1000 pricing will continue its march south at a rapid pace. And that's probably a good thing because this market hasn't achieved its true bottom since the BASF late 2017 Citral force majeure event," the supplier said.
After that event, when vitamin A prices soared, premixers and integrators adjusted formulas to reduce vitamin A inclusion rates, and have yet to make any changes.
"The global premix industry needs to see how low the vitamin A producers can go during an over-supplied market so they can recalibrate cost inputs for the next couple years," the supplier said. "The old $20.00/kg bottom benchmark probably doesn't exist anymore – certainly not right now with global energy markets in disarray due to the Ukraine war. We need a stress test to see where it bottoms out this summer."
Reluctant buying depresses prices in China
The average China vitamin A 1000 export spot price was assessed at $53.50/kg on 24 May, dropping by 27% compared to $73.50/kg at the beginning of 2022.
The average China vitamin A 500 domestic spot price was assessed at CNY 185/kg, declining by 30% from CNY 265/kg at the start of 2022.
Prices in both export and domestic markets started dropping sharply in May, with average vitamin A 1000 export prices dropping by 11.6% and vitamin A 500 domestic prices decreasing by 9.7% over the past month.
The Chinese vitamins market has been weak since the beginning of the year. A producer said earlier in May that it did not feel that lowering its prices would prompt additional buying interest because of the prevailing weak demand. However, offer prices have continued to drop.
Another producer said that demand was low, logistics in China remained a problem, and the breeding industry was still operating at a loss. The more vitamin A prices fell, the fewer people were willing to buy, it added.
