July 18, 2005

Niacinamide prices in China lower; near term price falls seen limited

An eFeedLink exclusive report
 

Niacinamide prices in China have slipped in recent days. Transacted prices in east China and Hunan province averaged RMB53/kg, while transacted prices in south-west and north-west China were in the range of RMB53-54/kg. Transacted prices in north and north-east China registered between RMB52/kg and RMB53/kg. Overall, transacted prices in most parts of China fell by RMB1 from the previous week.

The recent sharp rise in oil prices and the plant closure of a key US raw material supplier of niacin have led to the firm prices of a major raw material for niacinamide. However, continued sluggish demand restrained the upward momentum of niacinamide prices.

Additionally, the commencement of the second phase of production by Guangzhou Lonza Group Ltd, China's biggest niacinamide producer, has increased the company's production capacity sharply from 3,500 tonnes to 9,000 tonnes. However, the annual niacinamide consumption in China currently hovered at only 3,000 tonnes. Although exports of niacinamide were rising swiftly, the annual export volume is only about 3,000 tonnes. 

As domestic niacinamide consumption was not expected to increase significantly in the near term, Lonza faced two options in dealing with its large production capacity:

• Increase exports to the US, Australia and Japan

The rapid increase in exports in recent years has proven that this was a plausible approach.  However, more growth in export volume within a short period of time would be no easy task.

• Expand domestic market share through competitive activity

As Lonza already dominated about half of the China market, it would encounter difficultly in further expansion of its market share.  The company would need to re-examine factors such as product quality and pricing.

Concluding, with increased production costs due to prevailing high oil prices, coupled with improved demand of feed expected between the period of July and September, any fall in niacinamide prices in China in the weeks ahead would be limited.

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