September 10, 2003
The Upside Potential of Methionine Prices in China
An eFeedLink Exclusive Report
Since early July, when the last price rebound ended, China's methionine market prices have been sliding for consecutive weeks, dropping from a high of RMB 24.8-25.0 /kg to a low of RMB 23.6-23.8 /kg, by the second half of August. The market took a turn however, by end August, following the seasonal rise in demand and a collective move by methionine suppliers to move prices upward. Last week, market prices of methionine showed a rise of RMB 0.2 /kg over the previous week's.
For the near term, the views of market analysts are as follows:
1. On demand side, since the start of September, there has been a noticeable increase in demand for methionine, due mainly to the following reasons:
The market is now entering the traditional peak demand season of the year;
The lifting of the import ban on China's poultry by the Japanese Government has helped to boost demand;
The rise in poultry prices in various parts of China since August have improved market outlook for poultry products.
Hence, demand push factors are likely to cause market prices of methionine to continue moving up in the near term.
2. In the area of supply, except for Adisseo, which is cutting back on its supply this year, the rest of the methionine producers are maintaining their normal levels of production, with methionine import for the first seven months of this year showing little year-on-year changes. While statistics from the Chinese Customs showed an import of 4200 tons for July, indicating likelihood of a drop in methionine import, the reverse may also be possible, because of time lag involved in statistical compilation. The actual supply position is still uncertain at this stage.
3. Where market cost is concerned, currently, all the port prices quoted by producers in USD are staying firm at high levels, with spot prices for letter of credit transaction being offered at USD2.38 /kg, or higher than RMB 24.5 /kg. At present, import prices of methionine paid by market traders in China are already well above RMB 24.0 /kg. According to market sources, many major traders are planning to raise their prices to levels which would provide them with a reasonable margin of profit. Additionally, it is also learnt that some methionine producers may further up their offer prices. All these market cost factors may serve to push up market prices of methionine in the near term.
4. The current market price level of RMB 24.0 /kg is not considered low, compared to last year, when methionine prices stayed at around RMB 20.0 /kg for most part of the year. Even during the period before the outbreak of the Iraq war when global oil prices were shooting upwards, transaction prices of powder methionine in China only hit the level of RMB 27.0 /kg generally. Hence the upside to any further increase in methionine prices may not be significant.
5. Globally, prices in the European market are currently quite stable, staying in the range of Euro 2.30-2.33 /kg. After discounting customs duties, this price level is lower than China's port prices denoted in USD. Hence, there is little external push factor to provide a strong boost to China's methionine prices in the near term.
Overall, in view of improving market demand and the move by suppliers to push up prices, China's methionine market prices are likely to rise further. However, the upside may be limited by the already high level of methionine prices currently and the relatively easy supply situation at the moment.