Industrial Securities: Tight overseas vitamin supply boosts domestic exports and market share.

Event Review: On July 29,oanda 2024, a fire broke out at BASF's plant in Ludwigshafen, Germany. Subsequently, BASF Europe officially announced on August 7 that due to the impact of the fire, the delivery of some Vitamin A, Vitamin E, carotenoid products, and certain aroma ingredients would be affected by force majeure. The related production lines have been shut down, supply has been interrupted, and further delivery dates will be announced later. BASF plans to release the execution plan for existing contracts on August 16.

The high concentration of supply in the global vitamin market makes force majeure events involving leading companies exacerbate supply tensions, likely leading to price increases.

As a significant supplier in the global vitamin market, BASF’s Ludwigshafen plant has an annual production capacity for Vitamin A of 14,400 tons, accounting for 27% of the global supply. Its citral production capacity is 40,000 tons per year, representing 66% of global capacity. Due to the fire's impact on the citral production line, BASF also announced that the delivery of violettone, pyranol, DL-menthol, rose oxide, ethyl linalool, nerol, and phytol R would be affected. Additionally, the plant has an annual production capacity for Vitamin E of 40,000 tons, covering 17% of global supply.

The market concentration for Vitamin A and Vitamin E is extremely high, with the top four companies holding market shares of 79% and 76%, respectively. In early July, the cooling water intake system at DSM-firmenich’s Lalden plant in Switzerland was damaged by floods and mudslides, forcing a shutdown and affecting the production of Vitamin A and Vitamin E intermediates, with impacts expected to last several months. Simultaneously, DSM plans to divest its animal nutrition and health business by 2025. Given the supply pressures from both BASF and DSM, the global vitamin market’s supply tension is becoming more severe. Domestically, summer maintenance activities are causing Zhejiang Medicine, Shandong NHU, and North China Pharmaceutical to stop production lines for Vitamin E from July to September, further reducing supply and likely pushing prices higher.

The profitability of the livestock industry has improved, and the increase in vitamin prices is well-accepted among downstream customers. According to the Chinese Academy of Agricultural Sciences, the national average price of live hogs in the first half of this year was 15.63 yuan per kilogram, up 3.4% year-on-year. Coupled with a significant reduction in breeding costs, the hog farming industry has achieved profitability. In the first half of July, farms earned around 400-500 yuan for each 120-kilogram pig sold. The profitability at the terminal market has driven an increase in downstream demand for vitamins. The current sales situation in the downstream market is good. In the feed cost structure, corn and soybean meal account for 50% and 35%, respectively, and their prices have fallen from recent highs, reducing feed costs for farming enterprises. Premixes, including vitamins, amino acids, and trace minerals, constitute 5% of feed costs, with vitamins accounting for only 1.5%. Therefore, downstream sensitivity to vitamin prices is low.

The export of Vitamin A and Vitamin E from China has grown significantly, and domestic companies continue to increase their market share overseas. According to customs data, China's Vitamin A export volume in June 2024 was 599.85 tons, up 33.5% year-on-year and 11.13% month-on-month. From January to June 2024, China’s cumulative Vitamin A export volume reached 2,897.38 tons, a year-on-year increase of 17.44%. Additionally, in June 2024, China’s Vitamin E export volume was 8,794.2 tons, up 34.3% year-on-year and 4.1% month-on-month. In the first half of 2024, China’s cumulative Vitamin E export volume was 54,999.74 tons, a 29.5% year-on-year increase. Industrial Securities suggests paying attention to domestic Vitamin A and E production enterprises like NHU, Zhejiang Medicine, and Ningbo Tech-Bank.

Risk Warning: Risks include raw material price fluctuations, demand falling short of expectations, and delays in downstream procurement.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.