Feed additive tracker: Surging vitamin B5 prices, lower freight rates, weak economic outlook

Data suggests that skyrocketing prices for vitamin B5 led to a very significant drop in exports from major Chinese producers since February, said Kemiex.

The Swiss trade and market intelligence platform said European producers could outperform and win market shares locally and in export in relation to that vitamin.

However, most feed additives are trading at the lower end, it reported.

Stefan Schmidinger, head of markets and strategy, Kemiex, highlighted the latest trends and current state of the global feed additives market for chemicals investors at an event hosted by Credit Suisse investment bank last week.

Trade flows​

Tracking trade flows through a new tool​ ​developed by Kemiex, he said the Swiss trading and procurement experts have observed that, from January to May 2022, China saw continued growth in amino acid exports, particularly for lysine and methionine, but threonine exports dipped in April and May after two record quarters.

Kemiex also noted unusual trade patterns for US methionine imports from Malaysia in April.

Looking to vitamin buying and there have been weak trade flows so far this year for vitamin A, while vitamin E flows from China were lower between February and April 2022, following what had been strong year-on-year export growth of +20’000 tons in 2021 for that product, he said.

Capacity expansion

Many vitamins and amino acids remain oversupplied, Schmidinger told the investors.

In some product classes, further production capacity is being added, in the short- to mid-term. However, high inflation in manufacturing cost is providing a floor to downward price risk.

Chinese vitamin producers such as Tianxin, Wanhua and Garden are planning for additional vitamin E and vitamin A capacity, among others.

Looking at developments around methionine and methionine hydroxy analog (MHA), new capacity is expected from companies such as NHU, Sinopec, Wanhua and Liben Crop, while Evonik and Adisseo are continuously investing in upgrades of existing plants, said Schmidinger.

Easing freight rates ​

There is good news on the shipping front, he revealed. 

In terms of sea freight, shippers have been able to benefit from lower spot rates of late following the sanctions imposed on Russia and China’s reduced factory output through lockdowns. Those developments have hurt freight demand globally. However, spot rates are still higher than those of the pre-COVID-19 period.

Market participants expect rates to firm again, said the Kemiex representative. US retail inventories, an important indicator of upcoming freight demand, saw an unexpected spike in April.

Overall, the transport of feed additives is working despite longer lead times and management complexity given the ongoing port congestion and strikes, he continued.

Recessionary risks ​

More generally, Kemiex is hearing that both industry and consumers are increasingly concerned about the weaker global economic outlook and the recessionary risks, with unprecedented inflation, rising interest rates, and the economic slowdown in China adding to the current geopolitical challenges.

Additionally, large feed producers have indicated demand is being undermined by rising feed costs, which continue to outperform animal protein prices. A margin squeeze is posing serious threats and losses not only to breeders and hatcheries, some of which reduced activities for the new season, but also to growers who are suffering from price spikes for fertilizer and other farm inputs.

In China, months-long lockdowns have challenged the profitability of the food service sector, while in the US and elsewhere, meat processing and supply chain services have been affected by labor shortages and other constraints.