October 1, 2003
China's Vitamin Industry Sees Vigorous Growth; Breakthrough in New Technologies
An eFeedLink Exclusive Report
Vitamin is an essential element to the maintenance of life, in both humans and animals. New functions and applications for vitamins are continuously being uncovered, and new products are constantly being developed. Vitamins have been the focus for product development by multinational companies like Roche and BASF. The few global players in vitamins production have been working on carving up the market, so as to attain a controlling stake which ensures long-term market returns.
In May 1999, the U.S. Department of Justice commanded a world's top vitamin producer to pay for its misdeed -- a whopping fine of US$899 million for its illegal manipulation of vitamin prices. In November 2001, eight vitamin producers in Belgium, Germany, France and Japan were fined Euro $855 million by the European Union after 21/2 year of investigation into illegal manipulation of vitamin prices. The determination by the U.S. and E.U. to break the monopolies within the vitamin industry signaled the end of rampant profiteering in the vitamin industry. Companies, which lacked the necessary expertise and capital for survival, are forced to withdraw from the competition. Once the third largest vitamin producer in the world, French company Aventis sold its vitamin and animal nutrition business division to an investment company which formed Addiseo in 2001.
In June 2002, the Roche Group made announcement to focus its developmental efforts to biomedicine and diagnostics reagents, with plans to sell off its vitamin and fine chemicals divisions. In January 2003, a transfer agreement between Roche and Holland's DSM Group was officially signed. Following a reshuffle of the global vitamin industry, China, with its time-tested techniques of vitamin production, adaptable business strategies, competitive prices and better products, was able to establish itself firmly in the competition. With the production of vitamin H successfully kick-started in 2002, China has become one of the very few countries in the world capable of producing all variety of vitamins.
Many of China's vitamin products are already dominating the global market. According to statistics from China's Pharmaceutical Industry Association and Feed Industry Association, China currently produces about 200,000 tons of all types of vitamins per annum, up from 18,000 tons in 2001. This includes:
100,000 tons of choline chloride, making up 40% of global production;
48,700 tons of Vitamin C, making up 40% of global production;
12,000 tons of Vitamin E, making up 30% of global production;
3,000 tons of Vitamin A, making up 10% of global production;
as well as 20,000 tons of other vitamins.
China has shifted away from its reliance on imported vitamins, especially vitamins for feed use. At the present time, almost all of the vitamins in the domestic market are produced by China's sole or joint-venture enterprises, of which many have become major vitamin suppliers to the global market.
Figures show that in 2001:
39,000 tons of Vitamin C and its derivatives were exported from China, making up 80% of its domestic production.
Other exported vitamins volumes were reported as follows:
10,100 tons of Vitamin E and its derivatives;
874 tons of Vitamin B2 and its derivatives making up 65% of its domestic production;
and 1,300 tons of Vitamin A and its derivatives, making up 65% of its domestic production.
besides, 23,500 tons of choline chloride, which accounted for 24% of its domestic production, were exported.
Recently, China's achievements and breakthroughs in scientific research and techniques in the vitamin industry have underlain the competitive status of China's vitamin producers.
The discovery of a two-step fermentation process for Vitamin C by the Shanghai Institute of Biological Sciences of the Chinese Academy of Sciences (CAS) has propelled the China-produced Vitamin C to advanced levels. Roche's production techniques were also built upon this China-developed skill after its purchase of the patent rights from China. On the other hand, Hubei Guangji Pharmaceutical Company in China, has significantly increased the degrees of fermentation and achieved a commercial-scale production, increasing annual output from 120 tons to 1,000 tons.
In 1996 and 1998, Zhejiang NHU Ltd Co. became the first in China to commercially produce Vitamin E by coupling TMHQ and Isophytol, breaking the monopolistic hold of foreign giants on production technology. In 1999, through independent innovative production techniques, NHU succeeded in commercially producing Vitamin A in China, hitting an annual output of 2,000 tons.
The CAS' new production techniques for Vitamin D3 shortened the production process, and reduced the production costs at 10-15% less than similar overseas products. With the immeasurable potential in the market demand, the global vitamin industry in 2002 was on the verge of recovery after a period of dismal prices.
In late 2002, price increases were registered for all the main types of vitamins, albeit to a different extent. The Chinese vitamin producers also benefited from the price hikes in other ways:
Firstly, the fall in the exchange rate for the U.S. dollar, to which the RMB was closely pegged, led to a corresponding fall in the RMB exchange rate and strengthened the competitiveness of China's exports.
Secondly, the significant increases in demand for China-produced vitamins signaled the promising future of the industry. The demand for vitamins lies in two areas, namely feed and health / medicinal use. Sales figures from Roche showed that 65.85 million tons of vitamins were procured for the use in feed additive in 2001 out of total 78.06 million tons sold.
Global feed volume in 2001 registered less than 1% growth, against China's growth of 5.1%. It is estimated that by 2005, with higher living standards in China and rising demand for livestock and dairy products, the demand for China's commercial feed will hit 121 million tons, with an annual growth rate of as high as 12%. This in turn will lead to a corresponding increase in the demand for feed vitamins. For example, the feed industry consumed 3,200 tons of 500,000 IU of Vitamin A powder in 1998, which then grew to 3,790 tons in 2001, and is expected to increase to 5,880 tons in 2005.
Also, the demand for feed-use Vitamin E powder is expected to increase from 5,000 tons in 2001 to 7,750 tons in 2005. Vitamins are now widely used in other countries for medicinal and in health supplements. The average per capita consumption of Vitamin E is 10-15g per annum in the U.S. and 6.5g per annum in Japan. In the U.S. and Europe, Vitamin C per capita consumption even hit as high as 60-90 g per annum. Assuming that China's consumption is one-fifth of the U.S', the demand for Vitamin E (100% oil) would be 2,600-3,900 tons, and between 15600-23400 tons for Vitamin C.
China's vitamin industry has achieved the necessary infrastructure development in the aspects of technology, capital and market exploration, thereby enabling it to maintain a competitive edge in the world market. If the Chinese local producers could speed up their improvements in further exploring new technology, developing new products, expanding production scale and increasing market share, they are certain to make even greater leaps ahead.