February 28, 2008

More upside seen for vitamin E prices in China

China's Zhejiang Medicine Company (ZMC) and Zhejiang NHU announced last week that they will raise VE prices by 120 percent.

Higher raw material cost, the appreciation of the Chinese currency affecting export earnings and increased energy cost were cited as main reasons for the price hike.

Market traders said that the latest round of price hike was also driven by reduced supply. They estimated that the suspension of VE production by Adisseo had created a 15-percent supply shortfall worldwide.

With the latest round of price increase, ex-factory quotes by ZMC and NHU, which used to be 15 percent below those offered by DSM and BASF, are now on par.

In the near term, VE production costs are expected to remain steep. With increased expenses needed to comply with more stringent environmental laws such as the treatment of wastewater, China's VE producers will likely maintain firm asking prices.

Profitability of ZMC and NHU in the next financial year is projected to be higher with firmer prices for their VE products.

VE output from ZMC and NHU accounted for 40 percent of global production, making them among the largest VE producers in the world. DSM and BASF are the two other major players in the world's VE market.

RMB1=US$0.1400 (Feb 28)