3 March 2021 - The start-up of the DSM-Nenter Yimante vitamin E oil plant joint venture in Jingzhou, in the Hubei province of China, is considered as a key factor to bear in mind regarding future pricing of vitamin E.
The EUR 135 million 75/25 joint venture between DSM and Nenter was announced in late-January 2019. And once fully operational, the plant will produce vitamin E exclusively for DSM. Yimante has a nameplate capacity of 16,000 tonnes/year of vitamin E oil, according to data from Feedinfo’s Delphi analytics service.
However, in late-January 2021, Feedinfo reported that the plant, which was previously expected to be operating by the end of December 2020, would only be reaching regular, high-level production output in April-May.
The Jingzhou facility had been down since August 2019 for major upgrade work to bring it into compliance with DSM's safety and environmental standards. And it is understood that more recent indirect effects of the COVID-19 situation pre-Chinese New Year created further delays.
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But in more recent news, Joerg von Allmen, VP Category Management Fat Soluble Vitamins & Carotenoids at DSM, informed Feedinfo that production in Yimante has already started and the plant is in an active ramp-up phase. “We are pleased to confirm that after an intense period of upgrade work to ensure compliance with DSM’s safety, health and environmental standards, the production of Vitamin E has commenced as of mid-February – a slight delay versus the projected December startup,” he said. “After the plant was down for over 16 months with many upgraded aspects, it is like starting a new plant. This implies a careful step-by-step ramp up.” |
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Joerg von Allmenvon Allmen confirmed that the first materials are being shipped out of Yimante to DSM’s formulation and premix plants, but also stressed that increased production output will only be feasible in late April, more likely May.
Analysing the current context, he said: “The initial lower output in combination with current logistic challenges in and out of China means that it will take months to fill our empty supply chain pipeline around the globe. It is going to be April at best, more likely May, before the market will sense any relief to the current tightness from the additional Yimante capacity.”
“With the startup of Yimante, we now enter a ramp-up phase to increase output step-by-step during 2021. The expected output will be a fraction of the nameplate capacity as can be expected during a ramp up phase,” von Allmen added.
Q3 2020 to February 2021
In response to buyer expectations concerning the startup’s slight delay, the DSM category manager argued that the vitamin E market has become tight only in recent weeks and this is due to circumstances beyond DSM’s control.
First, looking at last year, von Allmen said: “The onset of the COVID-19 pandemic triggered hoarding throughout the value chain. The inevitable subsequent destocking dominated most of Q3. During those days, buyers may have felt acceptable supply despite Yimante being in an upgrade shutdown. It wasn’t until well into Q4, when the true underlying demand became visible again, that the market came to realise that supply wasn’t that abundant at all.”
“The market is now very tight as vitamin E producers face challenges including delayed shipments at higher cost or the impact of the antidumping rates on key raw materials in China,” he added.
It is also interesting to note that in addition to the Yimante project being delayed, production at DSM’s vitamin E plant in Sisseln, Switzerland was also temporarily down for maintenance in January/February 2021. Production has just restarted in Sisseln after successful maintenance work was performed.
von Allmen explained how DSM was able to balance both the delay in the Yimante startup and the programmed maintenance shutdown in Sisseln.
“In 2020, during the Yimante shutdown, we were squeezing every kilogramme out of Sisseln and more. However, this was not sustainable and Sisseln will return to a more conservative utilisation rate as of now. At Sisseln, we do not only supply the animal feed market but also vitamin E for applications in the human health and nutrition industry as well as in the personal care sector,” he said.
“As announced in October 2020, we had to defer this work from August last year due to the delayed startup of Yimante to ensure we could continue to supply our customers in the second half of 2020. As we could no longer defer the maintenance, the shutdown in Switzerland happened to coincide exactly with the startup of Yimante. This situation forced us to fully deplete our safety stocks along the entire chain to keep supply going, honour our contracts while keeping the products under strict allocation,” von Allmen added.
The Rest of 2021 and 2022
Buyers tell Feedinfo that they expect the vitamin E market to become more balanced in Q2/Q3 as the aforementioned supply chain disruptions ease and the additional production comes on-stream.
In von Allmen’s opinion, the market will likely see a continuation of the current overall industry supply shortage into Q2 2021. And the Yimante startup may not bring the anticipated relief.
“With the Yimante plant in ramp-up mode and with Sisseln at a somewhat lower sustainable output level, it will take most of the remainder of this year to rebuild our supply chain and safety stock for our regular business,” he stated.
“In addition, we have contracted several vitamin E co-manufacturers with the result that a significant part of the volume will not directly reach the end user market,” he added.
von Allmen went on to say: “The situation might further be accentuated if the market speculation about a European manufacturer who will perform multi-year life-time extension work on their vitamin E line becomes true.”
Asked about the longer-term impact of the Yimante startup, von Allmen said that he expects the market to remain tight in 2022, however, there will likely be more balance compared with the current situation.
“A lot will also depend on how our competitors plan their output,” he said. “And after the full ramp-up in Yimante we will have options to continue to grow with the demand of our customers. Having two vitamin E plants plus several formulation plants around the globe will give us flexibility to optimise the supply chain and continue to ensure supply in 2022 and beyond.”
“Future output is of course not only impacted by the vitamin E factory itself but also driven by the output of key intermediates,” von Allmen went on to say. “The recent past has shown the impact that certain events can have on the stability of demand and supply. The balance is fragile and the volatility significant, reflecting a complex supply chain for vitamin E.”
