When
we look at the cost structure of Choline Chloride there are three moving
targets for us to keep track of: production of raw materials, shipping costs
and customer demand.
The
main feedstocks for Choline Chloride are ethylene oxide (EO) and
trimethylamine.The price increases that we saw in 2020 were due to fear of
supply issues with EO, but since then supply and price have stabilized. With
trimethylamine, however, the story is not so simple. With the Chinese new year
beginning, counties across China have issued power outage restrictions on coal
burning factories and other highly polluting industries.. With the reduction in
supply of coal to chemical factories, the supply of trimethylamine has
decreased and with it we have seen an increase in price.
Around
the world companies are facing another problem. With shipping costs rising
sharply and container availability uncertain, traders are adding up to around
40% of the product cost to the final price in order to cover shipping. While
this isn’t a problem specific to Choline Chloride, it is compounding the
aforementioned issues with feedstock availability.
And
lastly, we have the factor of customer demand, which is perhaps the hardest one
to predict. On Glowlit we have seen user entries for Choline Chloride
increasing in volume, suggesting that companies are placing increased orders to
build up stock for the months to come. With procurement cycles becoming longer
and producers unable to track actual final customer demand, we might see a
price decrease as supply increases over demand in the summer months.
Vitamin A1000
On
January 27, 2021, Wanhua Chemical announced their intention to produce citral,
a key feedstock to Vitamin A. This news source is in addition to Xinfa
beginning to produce and supply vitamin A in the second half of 2019. Although
both projects are limited in capacity, they represent a clear trend of
releasing tightness in the market. We should see the price of vitamin A
decrease in response. Even with these new sources of production, suppliers
still hold the key to what happens in the market. The production quality of EU
origin Vitamin A has continued to provide an opportunity for the development of
China's Vitamin A industry.
