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INSIGHT: Transpacific Supply Chain Hurdles Keep US Feed Additive Prices Steady For Now

Source: Feedindo Logo Final

30 April 2021 - While weaker prices have begun to emerge in China and Europe for some of the key feed additives, the high cost of ocean shipments and delays continue to put pressure on US spot pricing and inventories.

As a result, price decreases in the Americas have been a little bit slower and spot price ranges wider than in other regions.

“In some cases, the US market could remain steady to firm until we are more flush with available product,” an importer based in North America said. “Even if/when cheaper materials start to arrive late Q3, I wonder if we’ll start to see a wider range of prices for some items as ocean rates continue to increase.”

Methionine was priced from €2.80/kg ($3.38/kg) DDP NWE in the European spot market, CNY 22/kg DDP ($3.39/kg) China in the China spot market, and from $4.50/kg DDP Midwest in the US spot market.

One importer commented on the struggle to book three loads from China that had been negotiated in April.

“I have one load booked for sure at freight rates of $9,700,” the importer said. “I thought I had bookings for the others, but twice now I’ve had them dropped on me. The last one was dropped as the vessel wanted general cargo and not our stuff. They rejected the load even though DLM is non-hazardous and has no safety issues.”

Most amino acids and vitamins have been in short supply in US markets since Q4 2020 because of ongoing supply chain constraints.

Methionine has been especially short in the US because of an anti-dumping investigation that reduced imports from France, Spain, and Japan. A 25% tariff from China and production outages in the US have contributed to tight methionine supply. 

FOB China prices for tryptophan fell to $8.30-9.00/kg on 29 April, down 9.6% from $9.10-9.70/kg in the previous assessment on 26 April, according to Feedinfo.

Tryptophan spot prices in the US were assessed from $10.25/kg DDP Midwest on the same day, according to Feedinfo.

“Spot offers from China have been rapidly dropping, with offers heard around $8.00/kg FOB China this week,” a buyer said. “I think prices could fall further after the May Day holidays also. But it will be the end of May, or June before those reductions and the material hit the US market.”

Inventories have been tight in the US since Q4 2020 because of supply chain constraints

“Shipment delays on imports don’t seem to be getting any better,” a spot buyer said. “Distributors are quoting some lower prices for what they indicate is in their stock, but what they forget to say is that their stock is in a warehouse in China.”

The China-to-West Coast US is the predominant route used to get vitamins and amino acids into the US.

Although the West Coast is seeing some clearing of vessels, the backlog of vessels continues and, in some cases, has just been moved to other US ports.

The queue that has been plaguing the container ports outside Los Angeles and Long Beach in California has begun to slowly ease. However, it will take until the end of June to get the queue cleared at the current pace, a shipping analyst said.

A supplier said that reduced congestion on the West Coast is a result of diverting goods to the East Coast and Southern ports.

“I believe the queue at Long Beach is going down because vessels are being redirected to ports elsewhere in the country, so they can get unloaded faster. Now there is increased congestion elsewhere,” the supplier said. “Going to other ports increases the cost of shipping, so ultimately they are going to want to go back to Long Beach, or freight prices will continue to rise. The Long Beach port is certainly not getting the queue down themselves. It is that fewer vessels are being sent there.”

As a result of the ongoing congestion on the West Coast, some market participants have confirmed shipping to the East Coast instead.

Mediterranean Shipping Lines (MSC) was not quoting freight rates to the Midwest or the inland US, only to the East Coast, a distributor said.

“Rates are cheaper on the West Coast than the East Coast now,” a buyer said. “But you do not know when you are going to get your container. It could be 7 days, could be 60 as we have seen recently.”

Shipping companies released their May rates recently and prices are up yet again, according to the Shanghai Containerized Freight Index (SCFI).

The Asia to US West Coast rate had been steady at $3,900/FFE from October to December 2020 and then steady at $4,000/FFE from the beginning of January 2021 until mid-April. Now the rate has shot up to $4,967/FFE over a period of just two weeks.

The Asia to US East Coast rate had been on a gradual upward trend from $4,500/FFE in September 2020 to $4,800/FFE a couple of weeks ago. Then, again over a period of just two weeks, the rate increased to $5,687/FFE.

“My rate went from $6,400/FFE in the first half of April to $13,000 plus for Asia to Midwest US via the East Coast," a spot buyer said. "New bookings have been going to the West Coast at $6,875, but the big unknown is how long will they sit at the port. I chose not to ship to the East Coast at a rate of $13,000+.”

“The rates are going to continue to increase, and we will most likely not see any relief until 2022,” the buyer added.