22/10/2009
October 2009 - Market Report

GENERAL UPDATE
During the summer months we saw several of our producers close for maintenance and in October there were a number of prolonged factory closures brought about by the National Day celebrations in the Beijing area. The supply of a number of our products has been affected by these closures, more information follows below.

The Chinese economy continues to grow, now at such a pace that we see the Chinese government trying to reign in some manufacturing output in an effort to reduce industrial capacity in some products such as steel, coal chemicals and cement. These efforts are partly being driven by a view from some sectors that too much of the 4 billion Yuan economic stimulus package (mentioned in our June market report) is being spent in the industrial sector. Economists believe that figures to be released at the end of October will show that the Chinese economy will have expanded 9.5% in the third quarter. This further fuels the belief that, should this economic growth continue, China will become the second largest global economy by the end of 2010, overtaking Japan.

The price of crude oil has continued to firm and the price for US light crude had risen to over US$80 per barrel at the time of writing. It seems that the continuing increase in price is predominantly due to a growing optimism that we are starting to see signs of a global economic recovery. Although we have not really seen a significant impact on the cost of goods yet we may see these increases follow through as the cost of oil derived raw materials (such as benzene and toluene) and the cost of shipping goods increase over the coming months.

The US$ remains weak and the expectation is that it will remain unbalanced in the coming weeks, with a potential to decline further against other currencies. This choppiness has been compounded by many investors selling off their US$ investments and reinvesting funds in higher yielding bonds in other currencies. The Euro has continued to strengthen against the US$, due to an (unfounded) perception that the Eurozone is fairing economically better than America. The GB£ remains relatively firm against the US$, however, it has become considerably weaker against the EURO since our last report.

We will be exhibiting next month at the Food Ingredients Europe show in Frankfurt. The team from Premium Ingredients will be available to discuss products from our existing range of food and beverage ingredients along with new products like Phosphates, Brown Rice Protein and Natural Berry Extracts. Please come to visit us on our stand 8E15.

VITAMINS & DERIVATIVES
ASCORBIC ACID
Prices remained firm during the summer, as a result of the factory closures in China during this period. During September, however, prices weakened slightly due to some excess stock material finding its way in to the market at low prices which unsettled the market slightly.

The market has now levelled again, following comments from China that some of the producers are extending their current shutdown period by an additional 30 days and consequently prices have firmed up. In addition, there are strong indications that all the producers will close for a further 60 days during the first half 2010.

It now seems that the Chinese producers intend to work hard to ensure the market price does not weaken too much and whilst we believe that the medium to long term outlook in China is for weaker pricing this may not happen for the next six months.

When China reopens their production around mid November, this will probably prove to be a critical period as the Chinese producers will be entering into negotiations for 2010 contracts at the same time.

VITAMIN B1 HCL & MONO AND VITAMIN B6
The market for these products remains stable at present and availability is good, it is unlikely we will see any change between now and the end of the year.

VITAMIN B2
No further price increases since our last report, however, we would still advise that availability is checked on this product before any commitments are made.

DL-ALPHA-TOCOPHERYL ACETATE – SYNTHETIC VITAMIN E OIL
Prices for this product ex China remain firm, with no strong indications that we will see any significant price reductions before the end of this year. Both of the main Chinese producers seem confident with their pricing strategy despite lower prices being seen from other producing countries. As with Ascorbic Acid if the Chinese producers are able to hold firm then we are unlikely to see any major decrease in the market. We recommend you keep in touch with us for regular updates on this item and to discuss contracts for Q1 2010.

FOOD & BEVERAGE INGREDIENTS
ERYTHORBIC ACID & SODIUM ERYTHORBATE
We understand that the Chinese producer who closed for maintenance at the end of June has now reopened. At the time of writing, however, spot prices remain firm and availability is limited in Europe. It remains to be seen whether we will see a reduction in price back to previous levels or whether the two Chinese producers will work to try and maintain the current higher prices.

CITRIC ACID
The market remains stable and we are now entering what is traditionally a period of lower demand for this product. The EU anti-dumping system also appears to be running smoothly therefore the only factors that could affect pricing would be any raw material cost or sea freight increases.

CAFFEINE
This is another product where market conditions are stable, although prices do vary depending on which producer is offering. The October/November period is usually the time where volume business for 2010 is discussed and it remains to be seen how the producers will react.

SUCRALOSE
We are now able to offer this intense sweetener on a regular basis, please contact us for competitive pricing and samples.

STEVIA – REBAUDIOSIDE-A 97%
France and Switzerland have approved this Stevia derivative for use in some applications. Reb-A 97% is currently sold by our USA Office to customers where our flavour and development lab can assist with applications. Please contact us with your enquiries.

I+G
Prices have sharply risen in the region of 10-15% from Q3 which is mainly due to the inability of a third manufacturer to come on stream and supply globally. We have also seen increased demand for this product in Asia.

MSG
Prices out of China have risen due to higher prices for crude glutamic and corn. We anticipate the market to stabilise after the high demand season comes to end, which is generally end of Q4.

PHOSPHATES
Prices are close to three year lows on quite a few of the calcium and sodium food grade phosphates. This is due to phosphorus prices/demand and energy costs being down significantly down. This is a good time to contact us for 2010 contracts

NUTRACEUTICAL INGREDIENTS
GLUCOSAMINE
Prices are firming for 4th quarter shipments with China increasing their prices by around 10-15% extra. Indian prices which were higher earlier in the year are now in line with Chinese. China is citing shortage of raw material as demand increases during winter months. We will be introducing DC grades of glucosmine for 2010, more details available from your sales contact.

CHONDROITIN
The UK is the most prohibitive in preventing imports of porcine and bovine chondroitin with Commission decision 2002/994/EC. Imports of Chinese material are limited to chicken chondroitin. Prices should have firmed, however, prices for shark Chondroitin have weakened 10% in the last few months which has therefore kept the market stable. Prices for other species have steadied and despite the problems with UK Customs there does seem to be product coming in from other member states.

MSM
Prices are still steady and we are holding stocks in Europe.

CURCUMIN
Prices just keep rising and this year there has been a 60% increase with no signs of stopping as yet. Booking ahead is advised, please contact us with your requirements.

FISH OILS
We have been working with two refiners in order to register their facilities to comply with EU hygiene guidelines. We are pleased to announce one of our suppliers is now registered and we hope that our other supplier will soon achieve that status too. Prices are favourable and a wide range of Ethyl Esters and Triglycerides are available along with high EPA and DHA formulations.

TABLETS & SOFTGELS
Premium can offer some finished formulations to customers looking for commodity products. Vitamin C 1000mg, Glucosamine 1000mg and Fish Oil 18/12 1000mg softgels are some of the items we are able to offer.

ESSENTIAL OILS & AROMA CHEMICALS
MENTHOL & MINT OILS
As we come into the IFEAT congress the MCX has made the expected push upwards on price. Much will be talked about at the Shanghai gathering and most sellers will be anxious to paint a comparatively negative view on the product in an effort to manipulate prices further. However, if history is anything to go by, this will be short- lived and unless there is a real underlying problem (highly unlikely) things will settle again towards the end of the month.

It is rare for much buying to take place at IFEAT, but this can influence the sellers sentiments and have a temporary impact on pricing. All figures reported for the crop would leave us to believe we should have a comparatively stable year although currency will certainly continue to play a significant part.

VANILLIN
Chinese prices appear to have reached the bottom and are even showing some tendency to rise. In the US, Rhodia are unable to offer and orders are on back allocation and they are unlikely to resume production until November. This may have an influence on Chinese prices if supply becomes further restricted.

METHYL SALICYLATE
Market is stable and we do not expect any immediate pricing issues. However, the volumes on this product mean it will be one of the first to be registered under REACH and we have yet to see how costs for this will be apportioned, so early next year it is possible some costs will be passed down the line.

PHENYL ETHYL ALCOHOL
For now market is relatively calm and no major increases are expected. A new factory has opened in China although quality is yet untested. This may have an influence on price in the coming months.

BENZALDEHYDE/BENZYL ALCOHOL
Prices are slightly higher as a result of the increased cost of Toluene. It is unlikely this will decrease anytime in the near future.

CINNAMIC ALDEHYDE
Prices are increasing a little and we would encourage customers to make contracts now as the market is likely to continue upwards.

HELIOTROPIN
Offers from China are a little lower this month.

MALTOL/ETHYL MALTOL
Following the temporary closure of the Beijing factory the supply has been a little tighter than normal. This has, inevitably, led to slightly increased offers from China. We would assume that this will settle again once the factory reopens, but the knock on effect will be felt through to the end of the year. We would urge customer to ensure they have adequate cover into early 2010.

LITSEA CUBEBA OIL
Distillation is finished in all areas now. The growth of the berries was good but due to the fact that many viewed the gathering as unattractive (hard to pick and prices not great) many farmers did not bother to harvest and therefore a large number of berries remained on the trees.

Total 09 fresh harvest is estimated to be between 6-800 MT (varies on how this reported). There is some carryover from last year which may well be included in this figure. It seems as if the purchases last year were very low (crop reported to have been about 500MT and carryover may have been as much as 200MT).There are some rumours that rain affected the quality of the berries, resulting in a lower citral content in the oil – however, at the time of writing we are unable to get a definite confirmation of this. Market has started slowly and price predictions are varied.

EUCALYPTUS/EUCALYPTOL
Market remains stable and little movement on price. However, most sellers in China a fully committed on stock and therefore offers currently are for November/December shipment, this may result on a temporary squeeze on price.

GARLIC OIL CHINESE
Offers from China are still increasing and the outlook appears to be firm. We have stock and are able to offer.

CORIANDER SEED OIL
The overall supply situation is unchanged. The size of the 2009 crop in Russia was below average with a large proportion of the seeds going to the spice market leaving very little volumes for distillation. The market price is likely to stay very firm for the next 9 months.

PATCHOULI OIL
Even though some argue that the recent earthquake has actually not affected the supply of patchouli oil (and other oils) from Indonesia , it remains that the recent quotes from origin have increased. This is being blamed primarily on the impact of the earthquake and secondly on the weak US dollar versus the Rupiah.

CLOVE LEAF OIL
Demand is up, price is up, and stocks are low. Until the new season oil arrives on the market in March 2010, the production in Madagascar is and will be much reduced. Distillers will be kept busy in the next 2-3 months by the clove bud harvest.

AMINO ACIDS
L-CYSTEIN HCL MONO & ANHYDROUS
Prices firmed just before the National Holidays, driven by a shortage of raw material as many of the small L-Cystine factories have closed and we are also seeing an increased demand which is typical for the time of year. Following the National Holidays prices have moved up further, how far the price will escalate will be dependent upon the number of contracts booked between now and the end of the year. Now is a good time to be looking at booking cover for first half 2010.

GLYCINE
Prices had come to down to incredibly low levels over the summer but have increased again over the last few weeks. This is due to increased demand, fluctuating raw material costs and the fact that many factories have sold off their excess stocks. As with the L-Cystein, demand will determine how high the price rises.

TAURINE
Prices have increased dramatically from the very low levels over the summer months and the suppliers are reporting limited availability as they have reduced their production levels. It is a good time to look at first half 2010 as product is tight.

L-METHIONINE
Availability at origin has improved and prices have reduced somewhat in consequence. We have stock available in the Europe and welcome discussions for 2010 contracts.

L-PROLINE /L-VALINE /L-ISOLEUCINE
These products are all short and prices are increasing. This is mainly due a reduced number of manufacturers in China and production problems at some of the manufacturing plants.