3 October 2022 - In 2021, Bain Capital and Cinven acquired Lonza Specialty Ingredients (LSI) for CHF 4.2 billion (slightly less than €4 billion). The LSI business includes Lonza's vitamin B3 operations.
When Lonza Group initially announced its intent to sell the LSI business back in 2019, the idea was to focus more on core businesses and make Lonza a pure-play pharma and biotech company, while finding LSI – a profitable specialty chemical business with strong positions across a range of attractive end-markets – a new home to develop and grow.
In October 2021, LSI rebranded as Arxada after becoming an independent company in July 2021.
Marc Doyle, CEO of Arxada, said at the time: “This new identity signals our intent to transform the company as we build on our longstanding heritage of innovation and pioneering technology to enhance our presence within the microbial control and specialty chemicals markets.”
With regard to the vitamin B3 business (in the form of niacin and niacinamide), the first significant development under Arxada occurred in late August 2022, when the company announced an extension of its long-term collaboration with DSM for the supply of niacin and other nutritional ingredients from its facility in Visp, Switzerland. As part of the collaboration, Arxada will continue to supply DSM’s vitamins and aroma ingredients business located nearby.
The new agreement builds on the existing ten-year relationship with DSM, which has been a key partner for the company’s vitamin B3 sales throughout this time.
Antje Gerber, President, Specialty Products Solutions, Arxada, said: “We are delighted to be extending our agreement with DSM and building on the longstanding, mutually beneficial partnership with our neighbours in the Swiss Valais canton. This significant new investment in our Visp facility secures the site’s long-term future, helping to fuel our future growth, and demonstrates our clear commitment to sustainability and reducing our carbon footprint.”
Additionally, Arxada said it will invest CHF 20 million in the Visp facility to expand production lines and increase its output of nutritional ingredients supplied to DSM. The investment, Gerber said, is geared towards optimising the company’s capabilities and capacities in Visp “in view of steady growth”, and ensuring that Arxada continues to deliver its solutions to customers.
Commenting on the production increases, Gerber said: “There is no capacity expansion needed for our niacin production in Visp.” The investment will accordingly focus on other products (intermediates).
Neither are there plans to expand the Arxada vitamin B3 plant in Nansha, in the Chinese province of Guangdong, which has had one of its production lines mothballed, Gerber said. The company also used to operate a vitamin B3 production unit in Guangzhou, also in Guangdong province, but that was closed down and the site is now dedicated to mammalian cell manufacturing.
“We are aiming to increase our production of a few key intermediates in the low double-digit percentage and expect the increased capacity to be available by mid-2025. There is a strong need for both vitamins and aroma ingredients, so key intermediates supplied to DSM will go into these two areas,” Gerber explained. “As is the case for most vitamins, the majority will be destined for animal nutrition. The vitamin B3 capacities will stay unchanged.”
Vitamin B3 Prices and Demand
Prices for vitamin B3, in general, have been declining all year.
In the “Q2 2022 Vitamin Markets Overview” published in late July 2022, Feedinfo reported that feed-grade vitamin B3 spot prices for delivery in Europe averaged €6.86/kg in Q2, a drop of 4% quarter on quarter. Since late July, prices in Europe have fallen again, hitting €4.85/kg on 8 September. At the time of writing, the price had increased but only marginally to €4.90/kg on 29 September. Spot prices for vitamin B3 are also lower in North and South America, and in China.
Given these dynamics, we asked Gerber to what extent the price situation may have been a factor in the decision to invest further in Visp and extend the collaboration with DSM.
“The decision to extend the agreement with DSM has been highly strategic with a strong emphasis on long-term collaboration,” Gerber said. “DSM has always been our partner of choice with strong market access and values which align with our own vision. Current market dynamics did not play a role in our decision.”
Gerber did, however, share a few thoughts on where vitamin B3 prices may be headed in the coming months.
“We expect to see the ongoing challenging environment and rising energy and raw material costs reflected in future vitamin B3 price levels,” she commented, highlighting that “currently the market situation for the key raw material [3-picoline or 3-cyanopyridine] is very dynamic and difficult to foresee.”
In terms of demand for vitamin B3, Gerber anticipates some changes, but not before next year.
She said: “Whilst the global patterns of vitamin B3 supply and demand are currently undergoing shifts, particularly with an influx of supply in the APAC region, we expect to see a more balanced market towards mid-2023 with the niacin having a premium over the niacinamide.”
Gerber’s bigger-picture view of Arxada’s vitamin B3 operations also remains positive.
“Historically, vitamin B3 production has always had an important role within our business and has gone from strength to strength. In the past year, we have become a more agile business with an increasing focus on sustainability and being responsive to our customers’ needs. This has led to an increased focus on the production of vitamin B3, positioning it as a core part of our business model,” she said.