Market Update: December 2020
Predictions of an increase in activity in November and December due to the pandemic’s effects have become a reality. New shipments coming into ports and orders placed have both increased more than 30% from last year based on our own research. During the CPhI China trade show last week, most factories and suppliers agreed with this number. Right now, we need to review trends and their factors before the Chinese New Year in early February 2021 so we can be prepared for Q1 2021.
There are six key factors to highlight before year’s end:
1. Policy: Some Chinese factories hope things will change after Biden takes office but believe it is too early to expect that. The current policy may remain stable until early March. The additional tariff will still be added to many shipments, but the outstanding complaint has reduced. Most importers understand it is not in their hands but must make do.
2. Currency: The value of RMB continues to increase and many vendors are trying to collect USD back early to avoid additional loss. This will lift the USD in the U.S. market as vendors aim get enough RMB when they do the exchange.
3. Transport: U.S. ports are still overwhelmingly congested, and delays keep taking place. Supply chains need to plan out one to two weeks more than normal to avoid delays at port. Domestic transport is also one to two days delayed due to the pandemic. Meanwhile, it is hard to book vessels from China and India due to the peak procurement season. Other news is that costs keep rising from freight to port handling.
4. Concern: There is still a high level of uncertainty surrounding the pandemic even with a vaccine being distributed. Continuous lockdowns, especially in Los Angeles, have disrupted supply chains immensely and there are still many unknowns as to what the coming months will bring.
5. Pollution control: We will hear less from China regarding shutdowns for pollution control this year. The outcome of centralizing factories into industrial zones has become beneficial and effective while pollution levels are kept within guidelines. Awareness and understanding have both greatly enhanced in China, but to keep GDP growing, the Chinese government may slightly loosen the control this year.
6. Starting material: The government is also trying to boost the economy, and base starting materials are guaranteed by the national power, especially those from the oil industry. However, corn price increased dramatically this year and it will affect downstream products in early 2021. Additional costs such as labor, production facility maintenance, etc., all increased.
Market trends are set to increase over the next two months for most products due to currency, starting material, freight, and people’s concern about the pandemic. We are encouraging supply chains to plan ahead to avoid delays.
Products with changes:
5-HTP is still in high demand due to the pandemic with natural 5-HTP from seed being hard to find while the fermented one is available but in tight supply. With the vaccine available, and production increasing, the market will cool down until next summer or fall.
Alpha Lipoic Acid
Supply is extremely tight and the factory producing product is fully booked with orders until March. The factory is trying to make the price stable, but availability is limited.
Current price reflects how much the factories want to lift the price to earn enough profit. Generally, production capacity keeps the balance, but some factories have stopped production due to relocation while some new producers have developed and gained market share.
Betaine and Choline
Price increased slightly due to currency and labor cost.
Branched-Chain Amino Acids (BCAA)
News from the CPhI trade show is supply is still tight and price is very firm.
Due to the pollution control, one of the factories is relocating and is not producing. The other major factories in Northeast China have limited their output to stay within pollution control guidelines. Demand is very strong, so supply is limited, and price is very firm.
Other news from CPhI is that coated carnitine will be available in the market soon to improve stability in tablet and solid form.
Citric Acid, Lysine and MSM
Price increase for these products is becoming more obvious due to freight costs while the product’s cost remains stable.
GABA and L-theanine
There is some price competition as new factories step in, but demand is still increasing due to market demand. It is predicted that price will remain stable but will depend on if supply is balanced with demand.
The major factories have ended price competition and price is increasing quickly. Due to competition from the past three years, price has been very low, but factories cannot afford any more decrease and several announcements has been made of a price increase.
Red Beet Root Powder
As a natural ingredient, Red Beet Root Powder’s usage has been significantly noticed this year and demand continues to increase. We think this trend will remain until the middle of next year considering the harvest from this year has concluded.
Price is stable, and factories are actively expanding production due to Sodium Hyaluronate’s many uses and close comparison to Collagen.
Soy Protein Isolate
The harvest was less than that of the previous year, and it is reported from the producing factory that price will continue to increase for the next few months.
Vitamin A and D3
Price is currently stable at a high level. Availability is slightly better than one month ago but still tight.
Vitamin B (D-calcium Pantothenate, Niacin, Niacinamide, Pyridoxine, Riboflavin, Thiamine)
Prices are at a reasonable level historically and may increase due to the factories’ pressure from the six factors listed above. If you use these ingredients on a regular basis, we suggest stocking up to avoid delays due to the port strain and holidays.
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 December 2020.
General Manager, ingredientsonline.com China
About the author: 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.