COVID-19 caution: Chinese botanical suppliers hold back on capacity building despite demand spike
This is according to Yinjun Hou, the chairman of Shaanxi Plant Extract Association’s commerce department. The association currently has 113 member companies.
Hou said companies were mostly clearing their warehouse stocks, instead of investing in capacity building to meet the heightened demand for plant extracts, especially those that confer immune benefits.
“Even if the demand is big, the factories are not willing to increase their investments for capacity building. This means that production capacity will not see a significant increase,” he said, adding that the available stocks could probably last for about a year.
Most companies are taking a cautious, wait-and-see approach when it comes to making new investments due to the market uncertainties brought by COVID-19.
“There will not be significant changes and we will make adjustments according to the market fluctuations brought by COVID-19. Most of us are still taking a wait-and-see, cautious approach.”
Echinacea, honeysuckle, elderberry, and tangerine peel are some of the best-selling botanical extracts at present, as they are said to confer immune benefits, according to Hou.
Citing statistics from the Xi’an customs, the capital of the Shaanxi province, he said that the total export value of all plant extract had increased by 26.5% in Q1.
While there is no breakdown of export figures for the best-selling plant extracts, he estimated their export value to grow by at least 50% in Q1.
“Ever since the start of the pandemic, echinacea, elderberry, honeysuckle, Chinese goldthread, tangerine peel are the best-sellers.
“Echinacea and elderberry are originally grown in the US and Europe and later breed in China. They are also grown in abundance in China and thus have become China’s best-selling plant extracts as well,” he said.
He noted that the increase in exports was also due to manufacturers pre-emptively stocking up the products in case of future uncertainties.
China’s biggest plant extract importing market was the US (50%) followed by Europe (15%), he added.
At least 20% to 30% of the orders received across the member companies cannot be fulfilled due to supply chain problems, according to Hou.
When it comes to sea freight, there used to be services to the US about five times per week, but this has been reduced to two to three times per week.
“And so many of us are fighting for a slot to ship out our products,” he said.
On the other hand, the cost of air freight has jumped by three to five times.
Under this situation, the association has decided to use land transport in April for shipping their plant extracts from Shaanxi to Poland, which according to Hou, is 50% cheaper than air freight and only requires 12 days, while sea freight will take triple the time.
However, the option only allows transportation to European countries, mainly those which are part of the ‘One Belt One Road’ track.