New Capacity Causes Price Slashing for Vitamin C   
By Zhang Yemei   

The quotation price of vitamin C from China's major producers had dropped to US$5/kg by the end of July 2010, falling 50% compared to the first quarter. Some global vitamin C purchasers had predicted at the end of 2009 that China's export price of vitamin C might go down in 2010, led by much capacity expansion. Anyway, such a dramatic price cut was beyond their expectations.

China's vitamin C makers won international market by large capacity

Vitamin C is mainly used in making pharmaceuticals, health care products, soft drinks as well as animal feed additives and so on. The developed countries in Europe and North America are the main consumer markets. The global demand has been increasing year by year recently. Supported by advanced and continuous improved fermentation production technology, China is the biggest producer and exporter of vitamin C.
   Presently, the global demand for vitamin C has reportedly reached 120 000 tons per year. There are six major producers globally. Except for Royal DSM N.V of the Netherlands (20 000 t/a), all are in China: Northeast Pharmaceutical Group Company Limited (NEPG) with 22 000 t/a capacity, CSPC Weisheng Pharmaceutical (Shijiazhuang) Company Limited (CSPC Weisheng) with 27 000 t/a capacity, Hebei Welcome Pharmaceutical Company Limited (NCPC Welcome, a joint venture between North China Pharmaceutical Corporation (NCPC) and Hong Kong Triplewell International Co Ltd) with a capacity of 25 000 t/a, Aland (Jiangsu) Nutraceutical Co Ltd (Aland, the former Jiangsu Jiangshan Pharmaceutical Co Ltd) with a capacity of 22 000 t/a and Shandong Luwei Pharmaceutical Co Ltd (Shandong Luwei, the former Shandong Hualong Pharmaceutical Co Ltd) with a capacity of 25 000 t/a, which has expanded from 5 000 t/a at the end 2009.
   China's export volume of vitamin C maintained an upward trend in recent years. China exported 69 790 tons in 2006 with an amount of US$233 million, 72 505 tons or US$342 million in 2007, 89 130 tons or US$777 million in 2008 as well as 82 120 tons and US$838 million in 2009. The export average price in 2007, 2008 and 2009 was US$4.72/kg, US$8.72/kg and US$10.20/kg respectively. China's vitamin C exporters won a strong voice by huge capacity to push the export price up till the end of 2009.

Price tangle ups and
downs in 2010

The data mentioned above shows that the international demand for China-made vitamin C had risen year on year until 2010. China vitamin C makers' predominant advantages coupled with continuously rising international demand resulted in vitamin C export prices increasing when the export prices of other vitamins declined in 2009. In the first quarter of 2010, the export volume and value of China-made active pharmaceutical ingredients excepting vitamin C enjoyed a price rise while vitamin C makers suffered a sharp price decline in both the export and domestic markets.
   China's export volume in the first six months of 2010 was 57 475 tons, compared with 42 490 tons in the same period of 2009, an increase of 35.3%. From the figure, the monthly export average price of vitamin C in the first half of 2008 and 2009 continued to move up. However, it dropped month by month in 2010. The monthly export prices in January 2010 averaged US$8.93/kg, fell to US$8.59/kg in February and then declined further to US$7.84/kg in June.
   Around 70% of vitamin C exports have been settled on long-term orders, and the remainder was spot business. With this in mind, it can be seen that the actual export prices of vitamin C have always been two or three months later than the spot prices or quotation prices. For example, the quotation price was between US$10/kg and US$11/kg in the first quarter of 2010, while the monthly average export price was between US$8.5/kg and US$9/kg. The quotation price was higher than the actual export price in Q1. Since March 2010, the quotation price showed steep downward trend. The quotation price in April was US$8.5/kg, declined to US$8/kg in June, dropped further to US$5/kg in July, and was below US%5/kg in early August. Chinese vitamin C makers are losing their control of the price. A new round of price slashing in a struggle for market share began at the industry-wide expense of wasting resources and suffering losses.
   Why did China vitamin C makers sink into new round of irrational competition given the gradually increasing demand in the international market? New capacity is thought to be the main reason.
   The balance between supply and demand was the major reason that the vitamin C export business performed well in 2009. In the early 2009, the global vitamin C capacity was around 118 000 t/a, composed of DSM and the top four Chinese vitamin C manufacturers as well as Shandong Luwei, with its capacity of 5 000 t/a (before expansion). The Chinese capacity in service was around 98 000 t/a. The global demand for vitamin C was around 120 000 tons. Supply and demand were basically balanced, which supported Chinese exporters to push up the price.
   The higher export price of vitamin C stabilized for more than one year and vitamin producers acquired huge profits, which attracted lots of attention from other investors who considered joining in this sector. News of expansion and new vitamin C projects came one after another throughout 2009. Shandong Luwei first expanded its capacity from 5 000 t/a to 15 000 t/a, and then further to 25 000 t/a. It completed expansion by the end of 2009. The total export volume of Shandong Luwei in 2008 was 7 760 tons, accounting for only 6.11 % of the national total. The company exported 14 081 tons in 2009, contributing 11.92% to the national total, making it the third biggest exporter in China next to Weisheng and NEPG. During January to May of 2010, Shandong Luwei's export volume soared to 11 351 tons, 23.54% of the national total, ranking number one in China.
   The new capacity from Shandong Luwei has put great pressure on other Chinese vitamin C producers and undermined the confidence of the other four vitamin C producers.
   Following Shandong Luwei, Zhengzhou TuoYang Industry Co Ltd also completed an expansion and put it on stream in early 2010. It began to export vitamin C product in the beginning of this year. Shandong Runxin Fine Chemical Company Limited and Mudanjiang High-tech Biochemical Company Limited (3 000 t/a facility started up in 2009) also offers vitamin C product to overseas markets in 2010. Along with other new construction for making vitamin C, vitamin C prices went further down. A new round of price slashing competition among Chinese vitamin C makers began.