Feed additive tracker: Pause seen in commodity ‘supercycle’ as prices dip

“Contracting for 3Q, and in many cases 4Q, is largely completed. Slower downside and sideway trading is expected for 2H 2021 for most categories.​

“Freight and input price inflation for oil, natural gas, corn, corn starch, soybeans, softs, or metals will pose a natural floor to manufacturers' prices. However, many of those commodities have retreated from the highs seen during an unprecedented ‘supercycle’ rally in the first half of the year​,” Stefan Schmidinger, partner, Kemiex, told us.

And a somewhat stronger US dollar against Yuan offers some short-term relief, he added.

Ingredient manufacturers in China have been reporting 1H financials, showing a divergent picture: amino acids producer, Meihua, and vitamin B1 maker, Huazhong, posted strong results while profits at vitamin manufacturers, Brother and Xinfu, dropped significantly, reported Kemiex.

For the second half of this year, markets are closely following the dynamic freight situation, vitamin A developments including BASF's new plant, and new and upcoming supply from several Chinese vitamin producers, along with vitamin C production trends, with rumors of lower prices for 2022 delivery, along with new projects pegged.

Kemiex also expects fallout from the US anti-dumping ruling on methionine.

Freight outlook ​

Ocean freight rates have seen another strong surge from June onwards, and coupled with high US retail demand and low inventory levels ahead of peak shipping season – August to October – rates are forecast to stay at elevated levels until around June 2022, according to the Swiss platform.

New ship deliveries and capacity are expected from 2023 only, and to date, global regulators have failed to manage sharply rising prices in an undersupplied market, commented Schmidinger.

“Several freight forwarders anticipate shippers to secure goods for Christmas 2022 by February and March, possibly breaking the usual peak shipping seasonality and leading to somewhat stable freight demand and rates during 2022.​

“According to IATA, air cargo capacity continues to slowly improve despite the lack of international passenger traffic. The market remains tight, with no clear decline in cargo demand. Some shippers reportedly converted from sea to air, to ensure timely delivery of higher priced goods.”​

Floods did hamper logistics in Europe but inland navigation is almost back to business as usual; the situation at South African and South China terminals is also normalizing, but COVID outbreaks in South East Asia are impacting manufacturing and ports in Vietnam, said Schmidinger.