By NGOH SK
        

 

Methionine market ended its rising trend lately, after surging 65% over the past ten weeks. However, even after the recent price dip, DL-methionine cost over RMB40/kg, a price level unseen since Q3 2011.

Ever since China's first methionine plant Chongqing Unisplendour commenced production in 2012, methionine prices have declined steadily, falling to RMB25-26/kg during the second half of last year, as local producers kept prices competitive to fight for market shares.

During the fourth quarter last year, methionine prices showed signs of recovering when Chongqing Unisplendour's operation halted since September due to "environmental pollution issues". Meanwhile, for some reasons, Sumitomo's plant in Dalian and Addiseo's in Nanjing did not begin to produce commercially as initially scheduled. With supply dwindling and demand rising while farmers fatten animals in the period leading to the Chinese New Year, methionine prices entered its first round of ascent, reaching RMB33--34/kg during January despite the winter outbreak of H7N9 bird flu in China, which curtailed the poultry inventories substantially.

After the Chinese New Year holidays, prices started to soften due to exceptionally low poultry population, the result of the bird flu outbreak and poor inventory building interest. Methionine demand from the hog sector slackened as well as hog prices plunged to levels unseen since 2010, shedding over 30% between September and April. Hence, methionine prices were dragged down to around RMB27/kg by early April.

This momentarily weak methionine market quickly recovered once poultry markets strengthened entering spring with disease rates subsiding, while the hog market rebounded with the support of the government's pork procurement programme. Meanwhile, methionine imports plunged a whopping 41% during April due to limited global output and reduced orders from distributors and traders. Swiftly, methionine regained lost grounds within a few weeks, and then skyrocketed to RMB44/kg by middle of June amid short supply.

Now that local production is crippled and supply is heavily dependent on imports, prices of DL-methionine staying in the range of RMB35-40/kg will be the new market norm. According to our sources, Chongqing Unisplendour methionine plant in China is likely to resume operation in August. However, even if that happens, methionine producers will be prudent in cutting prices with the costs of crude oil climbing due to Iraq's civil war crisis. Should crude oil prices escalate to 2008's level of US$130-140 per barrel, methionine prices could easily soar towards RMB60/kg, although breaching the RMB70/kg mark as it did in July 2008 is less possible due to higher production capacity of the industry now.