China’s lysine price has been facing a huge fluctuation throughout the year 2016, with the bottom in April and the peak in December. According to market intelligence firm CCM, the fluctuations are mainly the result of changing corn prices and new transportation policies.
According to CCM’s price monitoring, the overall downtrend of lysine price in China in 2016 went on in the beginning of 2016. It then rebounded and were able to rise till the third quarter of 2016. After another fall of the lysine price by two months, a huge surge was witnessed in November and December, leading to the peak of the price at the end of the year. Looking at the overall year on year change in 2016, China’s lysine price witnessed an overall rise of USD26.32/t, compared to 2015.
Monthly market price of 98.5% lysine in China, Jan. 2014-Dec. 2016
The main two reasons for the large fluctuation can be found in the changes of corn price in China and the intensified transportation pressure.
The price of lysine is strongly bound to the price development of corn in China, seen it as the main raw material. So, when the corn price fell in the first months of 2016, due to huge oversupply, the lysine price was reduced as well. The rebound in April was then the reaction of tighter supply in the domestic market before the launch of the national auction for temporarily stored corn.
The rebound of lysine in November is the result of the winter start in China, leading to a prioritised transportation of coal for heating instead of food additives like lysine. Another factor is the new traffic regulations, implemented in September, which require a lower transportation capacity. These effects led to a reduced supply and hence surging prices.
However, in January 2017, the price of lysine decreased again. This trend is mainly due to lessened transportation costs as a result of relieving strategies for corn transportation, flat sales during the spring festival in China, and lower demand for feed, because many farmers sold more animals in the spring festival time.
The downturn trend then continued in February as well, as the demand for lysine is still on a low level. Also, the price peak in December was more an artificially pushed price by manufacturers in the shadow of corn prices and high transportation costs, which did not last long as those prices are hard to keep.
Looking at the exports of lysine ester and salt from China in 2016, a boost of 26.62%, compared to 2015, can be seen. According to CCM, this trend can be explained by the low export price of lysine, combined with the continuing depreciated RMB. Overseas manufacturers have been preferred the cheap food additive from, China instead of the local ones.
What’s more, China’s manufacturers witnessed great net profit performances in 2016, due to the lower production costs. The future looks promising as well, due to the high lysine price, increasing exports, and the still falling costs of corn in China. Hence, domestic manufacturers are very likely to continue the great performance ongoing.
CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.
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