China's pollution clampdown triples vitamin C prices within one year
An estimated 95% of the world’s vitamin C is produced in China (according to vitamin distributors), and Chicago-based ingredient distributor Prinova's Europe VP Steve Watts said vitamin C prices had risen from $3.50/kg in October last year to between $11/kg and $12/kg now.
Caps and clampdowns
BBCA Group's China VP of sales and marketing, Highway He, said environmental pollution had hit China's total vitamin C production volume hard, resulting in a 30% decrease.
Those who violate the new laws could be imprisoned and have their plants shut down, as opposed to the previous penalty of merely being fined.
Watts said that prior to last winter, China's government placed a cap on how much energy power stations were allowed to produce.
"This coincided with the Chinese winter, and in the Chinese winter, they turn on the central heating November 15 (and) they turn it off March 15.
"The government gives priority to the residents, which means industry has been rationed on the amount of energy that it gets from these coal-fired power stations because of the cap."
He added that environmental modifications meant some plants had to remain closed for several months during summer.
Repercussion and response
This has led vitamin C produced in China to become more expensive, affecting not just the F&B industry but also the baking industry, where vitamin C or ascorbic acid is used to as a dough strengthener.
In light of this, He has advised affected companies to sign long-term contracts with reliable suppliers.
One supplier, Anhui Tiger Biotech (part of the BBCA Group), is attempting to mitigate the issue with its upcoming vitamin C manufacturing facility in Anhui, which is to be operational by Q4 this year.
According to He, the plant, which spans approximately 50ha within the BBCA Industrial Park, is expected to produce 40,000 tonnes of vitamin C a year.
Its direct access to some of the top international vitamin C factories means it can tap into US inventory from regional warehouses to fill orders.
Watts, on the other hand, suggested that companies take a cue from Prinova and purchase from distributors who have stock in the US.
Winter warning
He warned that another wintertime energy cap in China this year could see Chinese vitamin C manufacturers operating at 50% capacity, pushing prices up further in H1 2018 to a level "considerably higher than the $11/kg to $12/kg where we are at today".
Procurement manager for St. Louis-based AB Mauri North America, Kara Neville, said, "Current estimates suggest pricing could reach as high as $14/kg to $15/kg in the next few months, but we expect pricing to start trending down in the second quarter of 2018, potentially ending up to 150% higher than 2016 levels."
She added that the industry expected a market correction following several years of deflation before 2016.
Possible progress?
Watts said, "What we as the world maybe have failed to realise is how much of our manufacturing base has been transferred from the West to the East over the last 10 years.
"So you are seeing now a huge inflationary surge in prices of many ingredients coming out of China, and we're not talking 10%, 20% price increases. We’re talking 300%, 400% price increases."
One solution to the high prices could be to shift from coal-fired energy — which has been used to produce vitamin C in China — to gas, which is lighter on the environment.
"That probably means we’re going to be in this situation, in my opinion, for at least the next two to three years, possibly up to five years," Watts said.
