December 02, 2003

Difficulty in Forecasting Price Trend of Vitamin C in Global Market; Chinese Production A Key Determinant

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According to statistics from China Customs Authority, trade in Chinese pharmaceutical products maintained strong growth momentum from January to September 2003. The value of total imports and exports of these products during the first nine months of this year reached US$10.127 billion, registering a year-on-year increase of 26.23%. Meanwhile, China attained a trade surplus of US$1.417 billion in these products during the period.

However, the chairman of the Western Pharmaceuticals Department of the Association of Importers and Exporters of Pharmaceuticals and Health Products of China, Mr Qiao Haili said that hitherto strong growth in the domestic output of vitamin C in 2003 has caused prices to drop by a big margin. This has and will exert tremendous pressures on local producers of the product.

Mr Qiao expressed his opinion during a meeting with the press on the eve of the China Exhibition of the World Pharmaceutical Ingredients 2003. This exhibition, which is of international significance to the pharmaceutical industries, will be held from the December 8-10 at the Guangda Exhibition and Convention Centre in Shanghai. As the sole product from China's pharmaceutical ingredients industry that can play a leading role in product pricing in the world markets, vitamin C has become the hot topic of discussion for major pharmaceuticals companies that will participate in the exhibition.

Among Chinese exports of pharmaceutical ingredients, vitamin C is one of the few with an export value that exceeds US$100 million. Besides pharmaceutical vitamin C big producers like BASF and Roche, China's four local producers of vitamin C-- Dongbei Pharmaceuticals (Main) Factory, Weisheng Pharmaceuticals (Subsidiary of Shiyao Group), Weierkang Pharmacy Co., Ltd (Subsidiary of Huabei Pharmaceuticals Group) and Jiangshan Pharmaceuticals in Jiangsu province - have an average output of 10,000 tons per annum respectively.

The SARS outbreak in the early half of this year has raised the public's awareness of the importance of boosting their own immunity. Accordingly, demand for vitamin C increases, as people make a rush for it.  For the first eight months of 2003, Shanghai exported a total of 8,143 tons of vitamin C, showing a 9.8% increase compared to the same period last year. Also, the average export unit price of vitamin C and total export value rose by 1.1 times and 1.3 times respectively during the period.

With a specific focus on the production levels of vitamin C, Mr Qiao said that the Association of Importers and Exporters of Pharmaceutical and Health Products of China has held an emergency meeting with major domestic producers of vitamin C. The Association expressed the hope that producers will rationalize; restrain and limit their production levels.

"It is important for Chinese producers of pharmaceutical products to realize that it is impossible for them to monopolize the global market or for a particular enterprise to dominate the market with its own product," warned Mr Qiao.

According to industry insiders, recent increase in vitamin C prices was largely due to producers' self-regulation and limits on production, as well as the association's effort. However, analysts are beginning to worry that this optimism might be short-lived. Many producers, who have either shut down or cease production temporarily, have resumed production in their bid to capitalize on the rising prices of vitamin C. This could set in motion another vicious cycle. By then, vitamin C prices might fall again.

"It is my hope that through this exhibition, Chinese pharmaceutical enterprises and international pharmaceutical companies can exchange views on their understanding of the market situation, so that they can devise appropriate developmental plans for their companies," Mr Qiao told the reporters. He added that vitamin C producers should be rational, so that they are in a better position to judge the international market trend for vitamin C for the near future.

When commenting on the market direction of global vitamin C which Chinese producers may confront, Mr Qiao, an experienced practitioner in the pharmaceuticals field, felt that it is difficult to predict the future path of the industry. After all, the market direction is largely determined by producers' wise judgment of market demand and their corporate  strategies in not over-producing, thus flooding the market with excessive supply.