On 1 Aug., 2016, Fujian Guanfu Modern
Household Wares Co., Ltd. (Guanfu Household, stock code: 002102) announced that
its wholly-owned subsidiary, Nenter & Co., Inc. (Nenter), plans to
construct a 20,000 t/a vitamin E (VE) project, given the growing market demand
and the company’s production advantages in VE intermediates.
Source: Baidu
Details of the project are as follows:
-
Executor: Nenter and Nenter Shishou Co.,
Inc.
-
Construction site: High-tech Development
Zone, Jiangzhou City and Dongsheng Town, Shishou City, Hubei Province
-
Production scale: a designed production
capacity of 20,000 t/a, the sites are to be equipped with plants for VE
synthesis, drying, pulverizing, and isophytol synthesis
-
Construction Period: ≤10 months after
administrative approval is obtained
-
Total investment: USD86.91 million (RMB576
million), mainly from Nenter’s accumulated undistributed profits and bank loans
Based on data about the current domestic VE market, the new project is expected
to contribute an annual revenue of USD209.73 (RMB1.39 billion) and annual net
profit of USD45.26 million (RMB300 million), payback period (construction
period included) for the project is around 3-3.5 years.
Nenter is a leading producer of
2,3,5-trimethylhydroquinone (one of the key intermediates for VE), and has a
production capacity of 8,000 t/a. Thanks to its advanced production
technologies, the company has developed cooperation with domestic VE producers
and realised rapid growth – net profit rose by 8 times between 2012 and 2015.
However, Nenter is confronted with
challenges in challenges in realizing full production capacity and furthering
business development, as most leading VE producers have gradually realised
independent production of 2,3,5-trimethylhydroquinone. According to CCM’s
research, Zhejiang Medicine Co., Ltd. (Zhejiang Medicine) and Zhejiang NHU Co.,
Ltd. (Zhejiang NHU) are already capable of self-supply. Chongqing Southwest
Pharmaceutical Co., Ltd. (Southwest Pharmaceutical, former subsidiary of PKU Healthcare
Corp., Ltd.) and Jilin Beisha Pharmaceutical Co., Ltd. (Jilin Beisha) are also
able to produce 2,3,5-trimethylhydroquinone.
Therefore, to improve profitability, it’s
vital for Nenter to expand into the VE market and become a supplier to feed
additive enterprises at home and abroad.
“This VE project is an extension of the
2,3,5-trimethylhydroquinone supply chain,” said Guanfu Household, “By taking
advantage of this production line, Nenter can lower its production costs and
improve more efficiently utilize its production facilities.”
Notably, Nenter has successfully developed
a new synthesis technique for isophytol (another important intermediate for VE)
and is conducting pilot production at present. “This pioneering technique has a
practical reaction mechanism and technical route and the production process is
safe,” commented an expert. The new technique will guarantee Nenter’s safe
production of VE and lower production costs.
Nenter's financial performance,
2012-2015
Source: Fujian Guanfu Modern Household
Wares Co., Ltd.
Nenter’s new VE project is planned to be
put into production in H1 2017, and will have a marked impact on the domestic
VE market:
1. Market competition to be intensified
Since 2013, Nenter has provided VE producers with 2,3,5-trimethylhydroquinone
and 2,3,6-trimethylphenol, which eases access to VE industry. As a result,
competition among producers has become increasingly intensified and the market
price of VE has stayed low due to oversupply.
Under these conditions, a number of small- and mid-sized enterprises suspended
production or even withdrew from the market. In H1 2016, the domestic VE
industry showed high production concentration: main suppliers included Zhejiang
Medicine, Zhejiang NHU and Jilin Beisha.
It can be predicted that, after the large-scale VE project is put into
production, Nenter will again break the pattern of high production
concentration, and may even challenge the existing leading VE producers.
2. VE price likely to decline
The domestic market price of VE has showed an upward trend since the beginning
of 2016. According to CCM’s price monitoring, the market price of VE reached
USD13.58/kg (RMB90/kg) in July, more than two times the figure in Jan. However,
the transaction price was somewhere around USD12.07-12.82/kg, according to some
trade sources.
The price may remain high in H2 2016. At present, Zhejiang Medicine and
Zhejiang NHU have suspended production due to facility maintenance and the
coming 2016 G20 Summit. The two leading producers have also suspended the
offering of quotations and may raise their sales prices again.
In fact, Zhejiang NHU and Jilin Beisha have raised their quotations for VE
several times this year, which has supported the rise in market price. On the
contrary, Zhejiang Medicine increased supply to prevent excessive price hikes,
for it desires the market price to remain at a relatively reasonable level and
a high price may stimulate small-scale producers to resume production and
competition will intensify.
It is said that Southwest Pharmaceutical is likely to resume VE production in
H2 2016, and may be attracted by the rising VE price. Yet, it has already
missed out on large opportunity. At present, many producers have large
inventories. Even if it gets back to production in H2, the company will face
great competition.
Moreover, Nenter is likely to win a share of the domestic VE market by taking
advantage of its low production costs and large production scale. Therefore,
the market price of VE may not continue rising, and may even decline after
Nenter’s new project is put into operation smoothly in 2017.
Nenter, founded in May 2010, is mainly
engaged in the R&D, production and sale of pharmaceutical intermediates,
such as montelukast intermediates, 2,3,5-trimethylhydroquinone,
2,3,6-trimethylphenol and 2,5-dimethylphenol.
In Aug., 2014, the company was fully
acquired by Guanfu Household for USD271.59 million (RMB1.80 billion), after
which Nenter’s registered capital increased to USD33.19 million (RMB220
million).
Guanfu Household is a producer of ceramic
and bamboo house wares in China. In the past two years, to realise business
transformation, the company has gradually divested itself of existing main
businesses and broken into the pharmaceutical industry through asset
acquisition.
Nenter's basic VE production route
Source: Nenter & Co., Inc.
This article comes from Vitamins China E-News 1608, CCM
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Tag: vitamin