1 February 2021 - International-brand lysine HCl DDP Europe prices were assessed at €1.70-2.00/kg on Thursday 28 January, their highest level since 31 January 2013, having gained nearly 32% since the start of this year, according to Feedinfo data. Average international-brand lysine HCl prices were assessed at €1.15/kg in January 2020.
International-brand lysine HCl is usually sold at a premium in Europe, as Chinese producers offer lower prices to compete for market share. However, the two products were assessed almost at parity on 28 January as a deal for Chinese-brand lysine HCl at €2.00/kg for prompt delivery was reported by a trader in Europe.
Chinese-brand lysine HCl DDP Europe prices were assessed at €1.65-2.00/kg on 28 January, their highest level to date. The following day, a trader said there were no more offers at €1.65/kg for Chinese-brand lysine HCl, and new offers started from €1.80/kg.
Price drivers
Global shipping problems, high demand in China and logistical disruption caused by the pandemic – including longer times to load material and stricter regulations at major ports – have been cited as key reasons for sharp price increases on several amino acids for delivery in Europe, particularly lysine HCl and threonine.
As Chinese pork production recovers following the African Swine Fewer (ASF) crisis, suppliers have less incentive to export their goods. This is because growing domestic demand for feed additives and higher prices mean they can easily sell the material in China, market sources said.
Sources in Europe have also indicated a lack of offers from most suppliers in China for Q1 delivery, while traders offering within Europe have increased their prices, using the firming sentiment to add some margin.
"The market has been nervous and supply tightness is expected to remain until the end of February," a trader said.
Many consumers in China have prepared for the possibility of further logistical disruption after the Chinese New Year holiday by building up a substantial inventory.
China will be shut from 11-17 February for the holiday. As a result of lockdown measures implemented to slow the spread of COVID-19, logistics have halted earlier compared to the same period in 2020. One of the provinces affected is Heilongjiang in northern China, where many amino acid plants are located.
This new development is expected to further delay feed additive shipments out of China, with the global container shortage and extreme wintry conditions in some regions having slowed logistics by December.
Higher production costs, including energy costs, are also key drivers.
Corn is the key raw material for the fermentation of amino acids in China, and the overall price trend has been rising since the beginning of 2020. Corn prices dropped slightly this week with the most actively traded corn futures on the Dalian Commodity Exchange for delivery in May 2021 settling at CNY 2,746/tonne ($425/tonne) on 28 January, down 1.5% from CNY 2,789/tonne on 25 January.
Several producers in China have stopped offering material, claiming to be sold out, prompting some traders to start selling their material at increased prices.
“Everybody is jumping to buy, people are very concerned, I’ve never seen anything like it in all my years working in the industry,” one European trader said.
Markets driven by emotions
But some sources questioned the drastic price increases in Europe and said that this sentiment could be short-lived.
"There is serious market speculation going on, everybody is making each other crazy, there are a lot of emotions in the market now,” one source in Europe said.
Comparing the current market situation to last year, the source added that in 2020 the market was even more 'overheated', as COVID-19 in China was only just starting and people could not foresee how much of an impact it would have.
The source added that, at the time, there was genuinely no material being shipped out of China, whereas currently it was still receiving offers to buy lysine HCl and threonine from traders, indicating that the market was not as short as some might claim it to be.
A buyer in Europe acknowledged that prices were rising but also said that it was hard to find a logical explanation for such sharp increases.
Another consumer stated, "I don't believe in product shortages right now. As far as I know, 70-80% of material has been shipped from China on time. It might have been delayed for 20% of the market by two weeks but you can manage in that time."
The source added that the container situation in China was improving, and the longer one was able to wait, the lower the cost of shipping.
"The initial panic and uncertainty is now easing," said the buyer.
