Vitamin Output Balloons while Prices Fall — Analysis of Vitamin Export

By Du Hong, China Chamber of Commerce for Import & Export of Medicines & Health Products

Vitamins are organic substances necessary for maintaining the life activities of the human body and important active substances for keeping the body healthy. In recent year, the vitamin sector in China has developed gradually. China has become a big producer and exporter of vitamins, and holds sway in the international market today. China’s production technologies and market shares of vitamins C, E, B2 and D3 are at the leading edge. In the persistent global economic malaise, not only the volume but the prices of China’s exported vitamins fell in 2013.

Drastic reduction of export

The export volume of vitamins from China was 197.2 kt in 2013, an increase of 5.48% over the previous year. The export value was US$1.77 billion, a drop of 8.01%. The average export price was US$8.99/kg, a drop of 12.79%. The export price the B-group vitamins fell farthest. The average export price of pure vitamin B6 and its derivatives was 12.99% lower. The average export price of pure vitamin B1 and its derivatives was 21.93% lower. The average export price of pure vitamin B12 and its derivatives was 58.93% lower.
The volume of vitamins exported from China to the Asian market was 52.6 kt in 2013, accounting for 26.67% of the total and the export value was US$471 million. The volume exported to the European market was 68.8 kt, accounting for 34.87% of the total and the export value was US$654 million. The volume exported to the North American market was 53.0 kt, accounting for 26.86% of the total, and the export value was US$480 million. The volume exported to these three major markets accounted for 88.40% of the total.

High concentration degree of production

Vitamin producers in China have already gained advantages in production technology and international competition in quite a few vitamin market segments. A few producers’ output of a particular vitamin variety dominates the world market. The concentration degree is therefore very high. The top three exporters’ combined export volume of a particular vitamin commodity is over 60% of the total export volume. We can often see that one producer occupies the lion’s share of one aspect of vitamin production. For example, the output of vitamin B2 from Hubei Guangji Pharmaceutical Co., Ltd. and the output of vitamin B5 from Zhejiang Hangzhou Xinfu Pharmaceutical Co., Ltd. are, respectively, over 60% of the world total.
There were 753 exporters of vitamins in China in 2013, eight more than in the previous year; 129 of them were state-owned enterprises, accounting for 17.17%; 72 of them were wholly foreign-owned or Chinese-foreign joint ventures, accounting for 9.56%; and 552 of them were enterprises with other ownership, accounting for 73.3%.
The top ten firms in terms of export value in 2013 were Zhejiang NHU Company Ltd., Zhejiang Medicine Co., Ltd., China Shijiazhuang Pharmaceutical Group Co., Ltd., Shanghai Waigaoqiao Bonded Logistics Zone Service & Trade Co., Ltd., Jiangxi Tianxin Pharmaceutical Co., Ltd., Aland (Jiangsu) Nutraceutical Co., Ltd., Peking University International Hospital Group PKU Healthcare Corp. Ltd., Zibo Luwei Food Biology Co., Ltd., Zhejiang Hangzhou Xinfu Pharmaceutical Co., Ltd. and  North China Pharmaceutical Group Corporation, earning 52.78% of the national total export value of vitamins.

Vitamin C: reduction of output and price

China exports much vitamin C. The vitamin C sector here has advantages in technology and capacity in the international market and holds a market share of nearly 90%. The capacity, however, has been in serious surplus in recent years. According to statistics, the total capacity of the five major vitamin C producers in China is over 120 kt/a. The demand in the international market is only 100 kt. Stimulated by profits gained in previous years, the capacity of vitamin C capacity being constructed, expanded or planned for construction in recent years is nearly 250 kt/a, 2.5 times the demand in the international market.
China’s major competitor for vitamin C is DSM of the Netherlands. The capacity in its Darle Plant located in Scotland is around 23 kt/a. Products are mainly used in the production of vitamin C formulations. India also produces vitamin C. The weather in India is however unfavorable to fermentation. Raw material intermediate gulonic acid has to be purchased from China for follow-up processing.
The export volume of vitamin C (powder) from China was 73.2 kt in 2013, a drop of 1.40% from the previous year. The export value was US$243 million, a drop of 11.04%. The average export price was US$3.33/kg, a drop of 9.78%.
The volume of vitamin C (powder) exported from China to the Asian market, the biggest target market, was 20.3 kt, a drop of 1.52% from the previous year and the export value was US$76.14 million, a drop of 13.02%. The volume exported to Japan was 71.0 kt, an increase of 1.72% and the export value was US$31.30 million, a drop of 17.08%. The volume exported to the European market, another major target market, was 24.1 kt, a drop of 8.35% and the export value was US$76.11 million, a drop of 13.40%. The volume exported to Germany was 11.0 kt, a drop of 9.72% and the export value was US$35.68 million, a drop of 14.48%. The volume exported to the North American market was 18.8 kt, an increase of 4.14% and the export value was US$58.23 million, a drop of 7.14%. In particular, the volume exported to the United States was 18.5 kt, an increase of 4.51% and the export value was US$57.40 million, a drop of 6.93%.
Starting from the 1990s, international giants such as Roche of Switzerland, Takeda of Japan and BASF of Germany quit the vitamin C sector one after another. As the vitamin C sector in China had advanced production technology, large production scale, high concentration degree, independent intellectual property and strong competitiveness, it held a market share of 85% in the world and has a voice in the international market. Even so, the disorderly competition between vitamin C producers in China inevitably rendered the vitamin C sector into a vicious cycle of capacity surplus, oversupply and low-price competition. To prevent capacity surplus, vitamin C was specified as a restricted product in the Guiding Catalogue for Industrial Restructuring and the Guiding Catalogue for Foreign Investment Sectors issued in 2005. Owing to the prosperity of the vitamin C sector afterwards, however, new vitamin C projects were constructed in some areas in violation of laws and regulations. Some enterprises expanded vitamin C capacity without financial justification. The status of oversupply was therefore aggravated. As further policies were expected to be issued, producers made urgent delivery of products and foreign clients and traders hoarded great quantities of goods before the end of 2010. The export volume reached 110 kt in 2010, creating a new historical record.
The output of vitamin C in China has far exceeded demand since 2011. The market is extremely slack. Great quantities of goods are stored even in foreign clients and traders. The selling price of vitamin C is lower than the cost today and some producers have been forced to suspend production.

Vitamin E: reduction of the price by nearly 20%

The demand for vitamin E in the world is around 60 kt. The capacity is around 70 kt/a, the actual output is around 60 kt and the supply and the demand are basically balanced. According to estimates, the demand growth of vitamin E in China is 7-8%, the demand growth of vitamin E in other developing countries is 5-7% and the demand growth of vitamin E in developed countries is relatively slow.
Major vitamin E producers in China include Zhejiang Medicine Co., Ltd., Zhejiang NHU Company Ltd. and Peking University International Hospital Group PKU Healthcare Corp. Ltd. The output is around 40 kt and the share held in the global market is 45%. Major foreign suppliers include DSM and BASF. They hold a share of 55% in the global market. Eighty percent of vitamin E is used in feed additives, and the rest is mostly used in medicine and food additives and cosmetics. Vitamin E exported by China is mainly used in feed additives. Vitamin E exported by DSM and BASF is mainly used to produce pharmaceutical-grade high-end products. These two companies each have a voice in the global vitamin E market.
The export volume of vitamin E from China was 46.8 kt in 2013, an increase of 11.01% over the previous year. The export value was US$556 million, a drop of 9.22%. The average export price was US$14.02/kg, a drop of 18.22%.
Major markets for the export of vitamin E from China include the United States, Germany, Netherlands, Japan and Belgium. The volume of vitamin E exported by China in 2013 to major markets fell by different degrees. The average export price to the United States fell by 23.23%. The average export price to emerging markets fell more than 10%. The main reason was a slide of demand for feed-grade vitamin E caused by slack global demand. Despite an increase of the export volume compared with 2012, the drop of the export price more than offset the favorable factor. The growth of vitamin E consumption in China is quite slow today. The cost of preventing epidemics in autumn is also going up. Poultry raisers take a cautious attitude towards the second-round purchase of breeding birds. The consumption growth of vitamin E is therefore affected. As the market price of vitamin E in Europe is steadily declining, and the growth of feed consumption in China is not big either, the market of vitamin E will remain to be slack in future.

Vitamin A: drastic increase of the export volume

The demand for vitamin A in the world is around 15 kt, with an annual growth of 3-5%. As the technical threshold of vitamin A is quite high, in China large-scale production can be made only by Zhejiang NHU Company Ltd., Zhejiang Medicine Co., Ltd. and Xiamen Kingdomway Group Co., Ltd. These three vitamin A producers hold a share of around 40% in the global market. Foreign vitamin A producers include DSM, BASF and Adisseo. They hold a share of 60% in the global market and set the prices for the whole vitamin A market. Owing to China’s advantage in production costs, the market share of China-based vitamin A producers is expanding. Major markets for the export of vitamin A from China include the United States, Germany, Belgium, the Netherlands and Vietnam. As 80% of vitamin A is used in feed additives, the market demand in ASEAN countries with offshore catching and breeding as main business such as Malaysia and Vietnam is quite brisk.
The export volume of vitamin A from China was 3 383.06 tons in 2013, an increase of 13.76% over the previous year. The export value was US$71.17 million, an increase of 6.95%. The average export price was US$21.04/kg, a drop of 5.98%.
Vitamin A is mainly used in OTC medicines, nutrition supplements, feed additives and food processing. The concentration degree of production in China is quite high. Food-safety events of fast growing chickens and the spread of bird flu affected feed sector in the first half of 2013. Transactions in the brisk sales season were slack. Market players lacked confidence in market; some traders were in a hurry to sell their goods; and the price of feed-grade vitamin A slid steadily. Major vitamin A producers in China and the international giant DSM raised prices afterward, but failed to remedy the slack sales. In sharp contrast to the slack domestic market, both the export volume and the export value of vitamin A increased drastically in 2013. The export price, however, fell. This shows that vitamin A producers in China still use the tactics of low-price sales to compete internationally.

B-group vitamins: drastic demand increase in the international market

The variety of B-group vitamins with the biggest export volume is calcium pantothenate. The enterprise with the biggest capacity for calcium pantothenate in China is Zhejiang Hangzhou Xinfu Pharmaceutical Co., Ltd. The company produces over 60% in the total output. The second major producer is Shandong Xinfa Pharmaceutical Co., Ltd. Major foreign producers include DSM, BASF and Nippon Daiichi Pharmaceutical Co., Ltd.
Annual demand for calcium pantothenate in the world is more than 16 kt. Eighty percent of calcium pantothenate is used in feed additives. Only 20% is used in medicines and food additives. Since Nippon Daiichi Pharmaceutical Co., Ltd. quit the calcium pantothenate market, there has been a supply shortage with rising prices.
The volume of calcium pantothenate exported from China was 11.3 kt in 2013, an increase of 17.14% over the previous year. The export value was US$86.78 million, an increase of 14.33%. The average export price was US$7.68/kg, a drop of 2.4%.
China exported 2 202.19 tons of calcium pantothenate to the Asian market in 2013, an increase of 12.19% over the previous year and the export value was US$17.16 million, an increase of 8.75%. The volume exported to the European market was 5 103.24 tons, an increase of 19.42% and the export value was US$39.04 million, an increase of 16.21%. The volume exported to the North American market was 2 955.85 tons, an increase of 13.73% and the export value was US$22.75 million, an increase of 12.94%. Both the export volume and the export value of calcium pantothenate exported to major markets increased, but the average export price fell by different degrees. As Shandong Xinfa Pharmaceutical Co., Ltd. and Zhejiang Hangzhou Xinfu Pharmaceutical Co., Ltd. never suspended production for overhaul in the summer of 2013, so the current inventory level is relatively high. It is therefore expected that the transaction price in the international market will remain low in the future.
The major vitamin B6 producer in China is Tianxin Pharmaceutical Co., Ltd. (including Jiangxi Tianxin Pharmaceutical Co., Ltd. and Zhejiang Tianxin Pharmaceutical Co., Ltd.). Its output of vitamin B6 holds a share of over 70% in the international market.

The export volume of vitamin B6 from China was 4 414.69 tons in 2013, a drop of 1.56% from the previous year. The export value was US$99.83 million, a drop of 14.35%. The average export price was US$22.61/kg, a drop of 12.99%.
Major vitamin B1 producers in China include Hubei Huazhong Pharmaceutical Co., Ltd. and Jiangxi Tianxin Pharmaceutical Co., Ltd. Together, they hold a share of around 70% in the international market.
The export volume of vitamin B1 from China was 5 725.01 tons in 2013, an increase of 8.82% over the previous year. The export value was US$100.91 million, a drop of 15.04%. The average export price was US$17.63/kg, a drop of 21.93%.
Vitamin B2 is a small-volume vitamin variety but has many specifications. The output of vitamin B2 in the world is around 12 kt today. The demand is however only 7 kt. The output of Hubei Guangji Pharmaceutical Co., Ltd., BASF and DSM already holds a market share of over 80% in the world. Sixty five percent of vitamin B2 is used in feed additives, 22% is used in medicines and 13% is used in food processing.
The export volume of vitamin B2 from China in 2013 was 2 107.64 tons, an increase of 33.92% over the previous year. The export value was US$56.38 million, an increase of 18.16%. The average export price was US$26.75/kg, a drop of 11.77%.
B-group vitamins are regarded as minor vitamin varieties in market. The development is very rapid in recent years. According to latest reports in foreign countries, if a certain amount of B-group vitamins such as vitamin B1 and nicotinic acid/nicotinic amide are fed to livestock or poultry one or two months before they are taken out of pens for sale, their meat after slaughter will be more tender, contain more water and have a better flavor. This new discovery has directly led to new demand for B-group vitamins in the international market. The scale of the livestock and poultry breeding sector in Southeast Asian countries such as Vietnam and Thailand has expanded drastically in recent years. These countries have become new export markets for China’s B-group vitamins. It is expected that the export of B-group vitamins in China will develop soundly in the near future.
With the rehabilitation of the breeding sector in developed countries and the emergence of the breeding sector in Southeast Asia, the demand for vitamins in the international market has increased constantly in recent years. China has also gradually reduced the use of antibiotics. The development of the vitamin sector in China will therefore be promoted. Overall, the prospect for exporting vitamins from China is not promising however. Due to a slowdown of growth in animal husbandry and the rise of prices for feed raw materials in the international market, the growth of feed output in Asia and South America will slow down. Due to reduced consumption of meat, eggs and milk, the growth of feed output in China will be slowed down. Moreover, the increase of the feed upstream main-business cost and the extension of the feed inventory cycle will also affect the economic benefits of vitamin producers. The shadow the economic recession in the United States and Europe, the surplus of vitamin capacity in China, changes in the conversion rate of Renminbi and the uncertainty of foreign demand will all affect the export of vitamins in 2014. The export of vitamins from China will therefore remain at a low level in the future.