Feed additive suppliers focus on efficiency, digitalization and restructuring as profitability suffers

By Jane Byrne

- Last updated on GMT

© GettyImages/SARINYAPINNGAM
© GettyImages/SARINYAPINNGAM

Related tags L-Valine Amino acids dsm-firmenich Basf

The past few weeks have seen profit warnings and new financial forecasts by multiple animal nutrition and chemical companies. dsm-firmenich's accelerated restructuring, which includes production stops, asset reviews, and organizational restructurings, surprised markets. Other companies followed suit.

BASF did not only report weak revenue and earnings in Q2 but also lowered its full-year outlook for 2023. Adisseo’s net profits in the first half of 2023 decreased by -50% despite a positive +24% volume growth in liquid methionine. Evonik lowered its outlook​ for 2H 2023 substantially but cautiously highlighted positive signals for methionine and nutrition & care in Q3 2023.

Chinese market: Lysine and threonine exports down

Chinese groups such as Brother Enterprises, Guangji, Shengda and Yongan added to reports of declining profit margins, fierce competition, or even financial losses in the first half of 2023. China's manufacturing PMIs and a total export drop of -12.4% in June, including a -24% drop to the US, paint a bleak picture of underused factory capacity and global demand shortfalls, according to a Kemiex report.

China’s January to June exports, particularly in relation to amino acids such as lysine or threonine, are way behind 2022 volumes, -16% and -19% respectively. Market participants are closely watching the US dollar and Euro strength against the Chinese Yuan, as well as recent upside price risks from domestic corn starch and soymeal prices, said the Swiss data providers.

“In my recent discussions with senior management of sector companies, leaders highlighted their full focus on operational efficiency, which they are achieving through organizational changes, portfolio reviews, and investments in digital procurement, sales, and risk management tools,” reported Stefan Schmidinger, head of supply chain research​ at Kemiex.

“Some believe that volumes and prices have reached their lowest point, but they are still cautious about whether there will be market recovery in 2023.”

China June Exports Threonine (002)
Chart showing volume trends in China's exports of threonine to global market © Kemiex

Capacity additions, regulation, freight

In terms of capacity additions of note, Fujan based Chinese company, Xiamen Kingdomway Biotech Co, has announced a large-scale expansion project to support vitamin B5, inositol and Coenzyme Q10 production, according to Kemiex. 

EFSA has published a favorable assessment ​of the L- valine product of another Chinese producer, Xinjiang Fufeng Biotechnologies Co, preparing the grounds for EU market authorization.

Supply chains are functioning well, apart from some issues in Canadian sea ports and enhanced costs for crossing the Panama Canal, which has been affected by the dry weather of late, said Kemiex.

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