CCM: Chinese lysine price rises abnormally after Spring Festival 03-11-2016

Chinese lysine prices rose abnormally after the Spring Festival. However, CCM is of the opinion that this increase isn't going to be enormous and it's likely that the price will sink back down later, considering the price and supply situation of its raw material, corn.




Lysine transactions gradually returned to normal after the Spring Festival, but most enterprises decided to suddenly raise the prices of their products, which surprised their downstream customers.


Currently, in Feb., 2016, the market price of lysine is USD1,304.56 /t (RMB8,550 /t), up by 3.02% MoM, according to CCM research.


Although the increase wasn't great, the price increase was unexpected. Firstly, there usually isn't a huge demand for lysine after the Spring Festival, which is usually off-season for the livestock breeding industry. The average price of lysine over the past four years was lower than that in Jan. 2016.


Secondly, there is no reason for an increase from the perspective of the downstream market.


Live pigs:


Pig stock levels decreased over the month, as most farmers had actively sold off their live pigs before the Spring Festival, a festival which drives the demand and price of live pigs. As a consequence, demand for lysine from the live pig breeding industry is lower in Feb. than it was in Jan.


In Jan., the domestic stock of live pigs and adult sows declined, according to the Ministry of Agriculture of China.

  •  Live pig stock: 373.43 million heads, dropped by 2.7% MoM
  •  Adult sow stock: 37.83 million heads, dropped by 0.4% MoM

                


Chicken:

After the Spring Festival, the price of eggs dropped, and continued to do so, even approaching USD0.91/Kg (RMB6/Kg), which has discouraged farmers. In addition to this, the price of baby chicks was as high as USD0.53/head (RMB3.45/head) on average. For these reasons, farmers were unwilling to add additional chicks to their farms. This general situation is unfavorable for the future development of lysine industry.


There were two main reasons for the unexpected increase in the price of lysine, according to CCM research.


On the one hand, after the Spring Festival, the operating rate of lysine enterprises was low, which limited the supply of lysine. In Dec., 2015, COFCO Biochemical (AnHui) Co., Ltd. began the relocation of its factory, a response to the environmental protection policy "moving out of cities and into industrial parks", and the company still hasn't resumed production yet. Additionally, Xijie (Liaocheng) Biotechnological Co., Ltd. began to suspend production before the Spring Festival, and has yet to resume. 


On the other hand, after the Spring Festival, some European users began to stock up on lysine for Q2 2016, leading to increasing demand for Chinese lysine, which then resulted in tight supply.


In Jan., the export volume of the two main Chinese lysine varieties, lysine ester and lysine salt, was 21,037 tonnes, up by 5.23% MoM, according to China Customs.


The price of lysine won't increase greatly, and is likely to sink back down later, according to CCM.


Firstly, the tight supply will be alleviated, as more and more enterprises resume production and increase their supply. 


Secondly, the price of corn is likely to continue to decrease, due to a reduction of government interference in it. The decreasing price of corn, lysine's raw material, makes it unable to support a rise in the price of lysine.


       


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailingecontact@cnchemicals.com or calling +86-20-37616606.


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