Market Update: January 2022
by Tony Xue, General Manager, ingredientsonline.com China
Happy New Year! The new year brings new challenges, but we will persevere through. We are dedicated to providing you with first-hand industry insight as we navigate 2022. Here is the first Market Update of the new year.
Transport
Vessel availability is still limited as it has been since November, and the ocean freight cost is still increasing. Currently, the port congestion is still severe on the west coast, leading to a 2-6 weeks delay for pick up. It may be helpful to adjust routes to the central and east coast to avoid these delays. Some states, such as Utah and Minnesota, are trying to launch a shortcut rail from the port directly to the central logistic hub to ease the supply chain pressure. Some logistic companies may rent private port space to ensure the containers can be delivered and picked up efficiently, but the cost is doubled.
Production and Energy
We reported two issues of shutdowns and shortages in the last update, which are now improving. Many factories have told us that the power restriction has been lifted and production can resume as usual. The 2022 Beijing Winter Olympics and spring festival are just around the corner, and it is essential to be proactive to prepare more inventory to tackle the possible production interruptions. The improvement in production and energy does not ease the demand pressure instantly. There is still a big gap between the output and demand that needs to be filled.
Covid
Unfortunately, covid is still spreading worldwide at an unprecedented rate. The Omicron variant in China has led to Xi’an, China’s major city in Middle West, to completely lockdown. As a result, business operations have been greatly affected. However, most other parts of China are not experiencing lockdowns, which leaves the supply chain mostly unaffected.
Inflation
We finished 2021 with decades-high inflation. Unfortunately, that does not bode well for 2022. Prices are still climbing, and it will take time for them to come back down. The most recent price data we have is from last November when two of the most-watched inflation measures—the consumer price index and the personal consumption expenditure index—each climbed to a 39-year high. Supply chain chaos, rising rents, freight and energy costs, and the pandemic lead to economists expecting prices to keep soaring in 2022.
Uyghur Forced Labour Prevention Act
Joe Biden has signed the Uyghur Forced Labour Prevention Act to ban all imports from China’s Xinjiang. Unfortunately, for our industry, part of Xanthan Gum, Glutamine, BCAA, Tryptophan, Lutein, and Lycopene are supplied from Xinjiang. The influence will become evident in the next few months.
Ingredient Updates:
Ascorbic acid
The price tends to be stable in the first quarter. Although many challenges such as energy, labor, freight, and cost. Some new players stepped in and may try to gain more market share, while others have enlarged their production scale.
Ascorbyl Palmitate
The price and supply are stable.
Beta-Glucan
The price is currently stable due to the large production scale.
Caffeine
The supply is very short due to port congestion and production capacity from both China and India. This will continue in Q1.
Chondroitin Sulfate
Similar to our last update, the price is still increasing. The pandemic in Thailand also greatly affected production and made delivery very difficult.
Citric acid anhydrous
The supply is very tight, and factories are trying to catch up. Ocean freight plays a significant role in the cost. The price is increasing from last year and is still rising.
Creatine mono
The starting raw material supply issue is still underway, and the shortage is getting more and more severe. The craze will continue for a few months.
D-calcium pantothenate
Most factories stop quoting now, and it is on an uptrend. One of the starting materials is beta-alanine. The price has increased from last fall to now and has stayed high.
Fish Oil
Fish oil prices have recently increased by 10%-40% for different types. Due to the weather effect, the fish this year is slimmer, and the oil extract from fish decreases significantly.
GABA
Due to the starting material shortage, the synthetic grade price is increasing fast and short in supply. It has increased by 60% compared against that in last year's Q3. We think the spring festival and Olympics will make the supply worse. Meantime, the fermentation grade will become more and more available on the market. With the production scale increasing step by step, the price of the fermentation grade will be more and more comparable with the synthetic one.
Glycine
Due to the antidumping issue and pandemic, the supply from China and India is greatly affected. The price is soaring while the supply is tough to get. This also leads to its derivatives, such as magnesium glycinate price increase.
Gummies and soft-gels
The demand for gummies and soft gels is increasing. It is easier to market to kids on the consumer side and offers an easy way to increase daily vitamin intake. It could shorten the finished production lead time with direct packing on the production side.
L-Arginine
The price of Arginine is currently on a downtrend in China but is still holding firm in the United States and the supply is extremely tight. We think this will continue through the end of the year due to limited availability from CJ and Daesang.
L-Carnitine
The price is very high and has almost doubled in the past few months. The supply is limited due to pollution control and starting material, and it is not easy to increase the output.
L-Cysteine HCL, N-Acetyl L-Cysteine (NAC)
The price is the highest it's ever been. This is because the formula usage has increased a lot during the pandemic, and the production output is affected by the Winter Olympics, mainly in Hebei province. Therefore, the high price will continue in Q1 but tends to be stable.
L-Glutamine
The price has been at the highest level since the tariff increase. The price may trend downwards in Q2, but the Uyghur Forced Labor Prevention Act makes this uncertain.
L-Leucine, L-Isoleucine, L-Valine, BCAA, L-Isoleucine, L-Valine
Price tends to be stable but the highest it has ever been. The hydrolyzed leucine is stable.
L-Lysine, L-Threonine, DL-Methionine
The major factories in Korea have shut down, and the main supply is only from China. Since last August, the price has increased for food-grade, while feed grade is generally stable. Due to shortages, the major factories may try to keep the supply to the feed industry while cutting off supply to the food and supplement industry.
L-Theanine
The competition is becoming greater and greater. The fermentation grade will replace the synthetic method in the coming months.
L-Tyrosine/N-Acetyl L-Tyrosine (NAT)
Tyrosine is currently stable in price, and fermentation grade production has shut down. Factories typically use the same production line for N-acetyl L-tyrosine and N-acetyl L-cysteine. However, due to the sharp price increase, production priority is given to NAC, which leads to the shortage of NAT and the cost is firmly up trending.
L-Tryptophan
The price is firm and increasing slightly. The feed, food, and granular grades are all still tight.
Lutein
The price is stable, and the demand is increasing both domestically and internationally. The harvest this year is fixed on the supply side, and the price may still go up.
Minerals (Calcium, Magnesium, Zinc)
Due to the port congestions and domestic labor shortage, the lead time from the major factories has been extended, from a few weeks to 3-5 months. The freight and unexpected costs at the port are greatly affected by the price.
MSM
The starting raw material supply is getting better, and most factories can resume production and catch up with backorders. However, there is still a gap due to the spring festival, and the supply is still very tight.
Natural Vitamin E
The natural vitamin E family prices, including D-alpha tocopherol succinate 1210, 1815, and mixed tocopherol 90% oil, are all going up due to raw material shortages. It will at least last through Q1.
Niacinamide & Niacin
The price increases are slightly due to the overall cost increase.
Olive leaf P.E
The harvest is on track as expected. The price and supply are stable.
Quercetin Dihydrate 98%
The price is at the highest level in history and will not get any better until this August when the new harvest comes.
Spirulina
Currently, the production has been closed for the rest season. The new starting raw material will be harvested this April. Typically, the price will increase in Q1 due to shortages.
Sodium Copper Chlorophyllin
The price is still increasing slightly, and the shortage of raw material will not be resolved until May.
Sucralose & Aspartame
The price has already doubled compared to last year's Q3, and we see there is still room to increase further this spring.
Tartaric Acid
The price has been at a high level since last year. However, due to production interruptions mentioned above, the supply is falling behind demand more and more. This also leads to a Choline Bitartrate price increase and stay at a high level too.
Taurine
The price is soaring due to limited production and increased freight cost, which plays a big part in the cost breakdown. The factories are also planning production maintenance in February, which will lead to further increases.
Vitamin E 50% Powder and Vitamin E 98% Oil
With the total chemical cost and raw oil price increase, the price of vitamin E is also quickly increasing.
Vitamin K2 MK7
The price for synthetic is stable while more and more factories are beginning to produce by fermentation, and the price is on a downtrend.
Disclaimer: Information presented in this article are for customer reference only and subject to market fluctuations due to limited research and resources. Trends are current as of October 2021.
Tony Xue is the general manager of ingredientsonline.com China. His expertise supports market analysis, procurement forecasts, and vendor relationship management. Tony holds a bachelor's degree from Shanghai Foreign Studies University and has been working in the ingredient industry for 14 years.