March 2, 2015
A weak start for China feed additives markets in 2015
By NGOH SK
China's economic sluggishness crept into the livestock and feed markets, curtailing feed additives demand even with Chinese New Year just weeks away. With prices of most products flat or falling, the feed additives market stepped into the new year on a weak footing.
Amino acid market
DL-methionine prices dipped below RMB4,000/tonne entering January, as buyers continued to withhold buying while livestock market failed to recover. Sellers who were eager to move sales negotiated prices in efforts, albeit more cautiously. During middle of the month, two major foreign producers stood firm. As domestic production remained limited even though Unisplendour's plant in Ningxia has begun operation, the foreign producers' tough stance helped to hold prices firm. Moreover, feed millers began to increase stockpiles in view of stronger demand with Chinese New Year approaching. Climbing gradually, methionine prices increased 1.4% by end of the month.
Initially, methionine importers thought the anaemic price hike was due to feed millers' holding back the usual pre-festive stockpiling as Chinese New Year falls on February 19, which was two to three weeks later than usual. However, demand for methionine remained slow even with the festival approaching. Feed millers were reluctant to make purchases while the poultry market was plagued by the bird flu disease; additionally, the underperformance of the livestock market during the yearly peak period had dampened the confidence of feed millers. With demand poised to hit yearly lows after the festive holidays, there was little motivation for feed millers to accumulate high stockpiles of methionine. To them, betting on increased supplies from Evonik's Singapore plant and CJ-Arkema's Malaysia plant in the coming period makes more sense. Consequently, methionine prices remained flat throughout February.
Meanwhile, lysine prices picked up during mid-January, as buyers anticipated usages to increase with expanded feed demand. To their disappointment, hog prices showed no signs of strengthening as supplies exceeded pre-festive demand. Chinese New Year preparation was on a much more prudent mode with the economic outlook of the country bleak. Prices softened before the month ended, resulting in a negligible monthly rise of 0.31% on average. Demand for lysine remained subdued with hog prices sliding, holding prices flat all the way before Chinese New Year. And during the last two weeks of February, trade was essentially non-existent as feed millers and traders were on a long break for the festive celebration.
The slack livestock market that plagued the methionine and lysine markets exerted pressure on the threonine and tryptophan markets as well. On top of that, both products were facing excessive supplies, as producers stepped up production when prices soared during Q4. Further pressure came from the European market, which saw prices falling due to the economic woes in the regions. Hence, threonine and tryptophan, which usages were still limited in the domestic market, saw prices plunging 33% and 14% respectively during January amid sluggish export demands. Tryptophan prices showed no signs of stabilizing, losing another 11% in February whereas threonine dropped a more modest 4%.
With the livestock market feeble, only a handful of vitamin products managed to stand firm in the first two months of the year. Strongest of them all was folic acid, which had held its head high since availability tightened a year ago. Traders who had limited supplies in hand jacked up prices by a whipping 65% in January, dampening buying interest further; in February, prices rose by another 4% even though transaction was very limited. Over the past twelve months, folic acid prices have jumped by a stunning 840%.
Meanwhile, prices of vitamin B1 increased 2% in January but pared all gains entering February as producers were eager to clear inventories before Chinese New Year. On a stronger mode, vitamin B12 prices increased 10% during January and remained stable in February.
In the losing territory, biotin recorded the greatest price fall of 13%, as producers competed to clear stocks while demand was slow. Prices of vitamin A and vitamin E dipped 5% and 14% respectively during January amid excess supplies and weak export demand, stabilising only in the following month.
Vitamin D3 prices dipped almost 10% over the past two months on abundant supplies. Choline chloride producers cut prices by 8% while demand was light and output costs fell prominently in tandem with plummeting oil prices. Niacin and inositol prices were lower by 6% and 7% respectively.
Sulphate additives prices were stable during January and February.
During early January, calcium phosphate producers lifted prices in anticipation of buoyant demand. However, the pre-festive feed market was only strong enough to sustain this initial hike and prices stayed flat after the 2% increase.
China's feed and livestock markets are usually weak after the Chinese New Year holidays due to high animal releases prior to the festive season. This year, the situation will be worse while the country sits on the verge of deflation. Feed millers will tread very cautiously, limiting feed ingredients purchases to be on the safe side. Prices of feed additives will be under pressure entering March, except for products that are highly lacking in supply, for instance folic acid.
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