New capacity set to heighten Chinese folic acid price slide

By Jane Byrne contact

- Last updated on GMT

New capacity set to heighten Chinese folic acid price slide
Feed manufacturers will benefit from cheaper folic acid (vitamin B9) prices in Q4 as prices in China plunged 37.5% in August, said market intelligence firm CCM.

Prices for that vitamin in China skyrocketed over the last 18 months after tough new environmental regulations produced a supply shortage, said the research group. 

But with a flood of new capacity coming on stream, prices have dropped significantly.

In fact the CCM analysts say there is a risk of an overcorrection that will tip the folic acid industry back into overcapacity.

Several major new builds were announced in late 2014 and early 2015 as companies looked to cash in on the now-lucrative vitamin. “Running at full capacity, these new facilities alone would produce more folic acid in one year than the total global annual demand,”​ said the research group.

Xuejian Shi, senior researcher in CCM's food ingredients team, forecasts that prices will continue dropping for several months and could return to January 2014 levels - 600% lower than their peak in July 2015 [when prices reached just over USD$325,000/t]. 

Folic acid, a synthetic folate compound, is converted in animals to biologically active folates. They are essential for DNA synthesis, repair and methylation, in particular nucleotide biosynthesis and remethylation of homocysteine.

China produces around 1,400 tons of folic acid a year, of which 1,100 tons is exported.

Around 70% of Chinese folic acid production goes to the global feed sector, with pig production accounting for a high percentage of its use, says CCM.

Of the 300 tons of folic acid consumed in China, about 210 tons goes to domestic animal production.

CCM lists the top three Chinese folic acid manufacturers, with a capacity of over 500 t/a, as:

•           Shandong Xinfa Pharmaceutical Co Ltd

•           Changzhou Niutang Chemical Plant Co Ltd

•           Jiangxi Tianxin Pharmaceutical Co Ltd

Folic acid price hike

Supply began to tighten in early 2014 as several Chinese folic acid producers shut down production due to low prices, which were then hovering at around just USD$30,000/t for 98% feed-grade folic acid.

But the supply situation worsened in H2 2014 as a number of manufacturers began to slow down production to reduce pollution emissions ahead of the introduction of tough new environmental regulations in 2015.

This caused folic acid output to fall markedly – total output in 2014 was just 1,300 tons, a fall of 200 tons compared to the 1,500 tons produced in 2013, said the analysts.

A shortage of folic acid quickly emerged, sending prices soaring. By October 2014, 98% feed-grade folic acid prices had risen to almost USD$100,000/t, and by February 2015, this figure had reached USD$195,000/t, a sixfold increase in under a year, said China based CCM.

Pollution challenges

Shi told FeedNavigator folic acid producers such as Changzhou Niutang Chemical Plant, Changzhou Xinhong Pharmaceutical and Chemical Industrial Technologies and Changhzou Kangrui are back up and running again.

“But their production is still being affected by their attempts to reduce water pollution levels to comply with two new major environmental laws – the Environmental Protection Law of the People’s Republic of China and the Action Plan for Prevention and Control of Water Pollution – implemented on 1 January and 2 April 2015 respectively.

These are the strictest environmental regulations ever enacted in China and, for now, producers have to reduce production so that they don’t produce too much waste water,”​ said the analyst.

Chinese manufacturers mainly apply NABGA, TAHPS and TCA to produce crude folic acid and refine it to obtain pure folic acid products. This method is said to release 250 to 300 tons of waste water per ton of folic acid produced. The ammonia nitrogen and inorganic salt contained within the waste water are the components that pollute the environment, he said. 

New capacity

In terms of when the extra folic acid production capacity will come on stream in China, the researcher said Anhui Shengda Pharmaceutical Co’s 600 tons per annum (t/a) build is expected to be completed in the second half of 2016.

Shangdong Hongzhi Biotechnology’s new folic acid facility has already started full production, while Tianxin Pharmaceutical has put the first phase — 250t/a — of its construction project into operation.

And the first products produced by Jiangxi Zhangle Fine Chemicals’ 500 t/a facility should hit the market in December 2015, said Shi.

The CCM research team also noted that, in recent months, several other companies have announced plans to begin work on folic acid manufacturing bases.

September saw Xinjiang Wujiaqu Xingnong Cycle Chemical announce plans to construct a 100 t/a folic acid production site in the Xinjiang Uygur Autonomous Region, with work on the USD$4.7m facility to begin in January next year.

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