Amino Acids Prices Surge and Plunge at the Start of the Year

After the beginning of spring, with the Lantern Festival approaching, the amino acids market has already experienced significant changes before the end of the Chinese New Year. According to Mysteel's data collection, as of February 8th, prices of various amino acids in China have shown significant fluctuations. Specifically, the prices of L-lysine HCL and L-Threonine have notably decreased, with the national average price of L-Threonine dropping to 10,366.67 yuan per ton, a decrease of 11.27% compared to pre-holiday levels, a drop exceeding 1,000 yuan per ton. Conversely, the price of L-Methionine increased by more than 1,000 yuan per ton, with the national average price reaching 21,450 yuan per ton, representing a 5.49% increase compared to pre-holiday levels. The market continues to exhibit fluctuating trends, while there are signs of recovery and potential price increases for L-lysine Sulphate and L-Tryptophan. 

I.Predictions for Future Trends

1. Summary of Amino Acid Price Fluctuations at the Start of the Year

The specific price movements of different amino acid varieties are as follows:

12. lysine HCL and L-Threonine: Due to weakening domestic and international demand, companies have successively lowered their quotes, resulting in significant price declines. L-Threonine prices have fallen below the annual average price for 2024, with both high and low prices products present in the market, leading to an overall weak spot price trend.

12. Lysine HCL: Although the rate of decline has slowed, prices in some regions and brands have dropped to around 10,200 yuan per ton, with most domestic prices trending downward, and transactions remaining generally weak.

12. Valine: Experiencing oversupply, company quotes have declined, and market prices have followed suit.

12. Methionine: Benefiting from company price hikes and the need for restocking among downstream enterprises, market prices have risen significantly, surpassing the annual average price for 2024.

L-Lysine Sulphate and Tryptophan: Influenced by rising corn and soybean meal prices, these products show strengthening trends. While the increase in L-lysine Sulphate prices is relatively small, the trend is strong, and L-Tryptophan company quotes have risen noticeably, with market prices showing a stable upward trend.

2. Reduced Profit Margins for L-Lysine HCL and L-Threonine: Supply-side Pressures Persist

Due to falling company and market prices, profit margins for L-lysine HCL and L-Threonine have been significantly reduced. As of February 8th, the theoretical profit (without deducting by-products) for L-Threonine in the Northeast production area fell to 1,408 yuan per ton, a 34.66% decrease compared to pre-holiday levels. The theoretical profit for L-lysine HCL in the Northeast production area fell to 2,989 yuan per ton, a 7.83% decrease compared to pre-holiday levels. In terms of operating rates, the national weekly operating rate for amino acids stands at 82%, unchanged from pre-holiday levels, with overall operations remaining at a high level. Additionally, export markets have been affected by anti-dumping events and a 10% tariff imposed by the U.S., further altering the global amino acids landscape. The division of the EU market places additional supply-side pressures on domestic amino acids, necessitating attention to first-quarter export trends.

2. Increased Downstream Inventory Demand: Varying Transaction Conditions

Downstream inventories of L-Lysine, L-Threonine, and L-Methionine typically range between 40 to 60 days. Post-New Year transactions for various amino acid varieties differ. For instance, L-Threonine and L-lysine HCL, which experienced significant price drops, saw relatively sluggish transactions amid high-price collapses, leading to a cautious market sentiment. In contrast, L-lysine Sulphate, experiencing a rebound from the bottom, saw increased inquiries but only moderate transaction volumes. L-Methionine, which saw substantial price increases, recorded better transaction volumes. Overall, the average amino acid inventory stands at 47.67 days, a 5% month-over-month decrease. L-Tryptophan prices remained relatively stable, with enterprise quotes increasing, leading to mostly negotiated prices for actual orders. L-Valine prices saw minor declines, with post-holiday demand yet to recover, resulting in relatively stable transactions.

II. Outlook for Future Amino Acid Prices

Looking ahead, based on variety-specific analysis:

12. Threonine: With significant price declines, future market prices may stabilize after slightly declining to align with company transaction prices.

12. Lysine HCL: Prices are expected to experience minor declines, with mixed market sentiments ranging from bearish to neutral. However, considering the value of this amino acid variety and historical price trends, L-lysine HCL prices are generally lower than those of threonine, and its exports are heavily impacted by anti-dumping measures. Thus, short-term prices may still face some downward pressure, though not excessively so.

12. Lysine Sulphate: With evident upward momentum, prices are likely to rise modestly in the short term. Long-term trends will depend on supply-side pressures and new capacity additions, potentially stabilizing at higher levels.

12. Methionine: This recent rapid and substantial price increase has surpassed last year's annual average price. Attention should be paid to potential risks and latest company quotes, indicating possible further increases, with prices expected to remain stable and strong.

12. Valine, L-Arginine, L-Isoleucine: These varieties are likely to continue with stable, albeit weak, performance.

L-Tryptophan: Prices may rise under the influence of rising corn and soybean meal prices, with the extent of increase contingent on demand recovery progress.

III.Sudden impact

Soybean Meal Price Surge and Its Impact on Amino Acid Market

According to data, as of February 10th, the average market price of soybean meal was 3,800 yuan per ton, representing a 26.6% increase compared to 3,000 yuan per ton at the beginning of January. The significant price increase can be attributed to several factors:

1. Supply-Side Constraints

Extreme Weather in Major Soybean Producing Countries: Adverse weather conditions in global soybean-producing regions have led to expectations of reduced supply. Persistent drought in Argentina has hindered soybean growth, increasing expectations of production cuts. Frequent heavy rains in Brazil's main producing areas have delayed soybean harvesting and loading, leading to a sharp drop in export volumes. This has driven Chicago Board of Trade (CBOT) soybean futures prices to a seven-month high, increasing the cost of imported soybeans.

Sharp Decline in Domestic Soybean Arrivals: Soybean arrivals from February to March decreased by more than 30% year-over-year, compounded by stricter customs quarantine policies, causing oil mills' soybean inventories to continue declining.

Low Operating Rates at Oil Mills: Due to factors such as the Spring Festival holiday, oil mills took an early break, and post-holiday operations resumed slowly. Daily soybean meal production dropped nearly 40% compared to pre-holiday levels, reducing market supply.

2. Robust Demand

Concentrated Restocking Demand in Livestock Feed: Downstream feed enterprises had insufficient stockpiling before the holiday, resulting in a concentrated surge in restocking demand after the festival, significantly increasing soybean meal procurement needs. The tight market supply exacerbated the imbalance between supply and demand.

Positive Outlook for the Livestock Industry: Post-festival market recovery and increased consumer demand for meat and poultry products have improved industry prospects. Feed mills have shown heightened enthusiasm for purchasing soybean meal, gradually boosting market transaction volumes.

2. Influence of Futures Markets

During the Spring Festival, international soybean futures prices rose, and upon resumption of trading, domestic soybean meal futures experienced catch-up gains, rising for several consecutive days with a 2.42% increase compared to pre-holiday levels. The rise in futures markets boosted market confidence, activated investor interest, and enhanced the buying and selling atmosphere in the spot market.

2. Other Factors

Uncertainty in Trade Policies: Uncertainties in international trade policies, such as tariffs between China and the U.S., have increased market expectations for higher soybean and related commodity prices, driving up prices.

Cost Push: As a raw material for soybean meal, the rising international soybean prices due to various factors have increased production costs, thereby pushing up soybean meal prices.

Impact on Feed-Grade Amino Acid Market

As one of the key ingredients in animal feed, the substantial increase in soybean meal prices directly boosts the demand for amino acids like L-lysine, L-threonine, L-valine, L-isoleucine, and L-tryptophan, driving their prices upward.

The direct impact on the market includes reversing the downward trend of L-valine prices and initiating an upward movement. Based on historical trends, L-valine prices would typically see a significant rise. However, this time, given that Dongxiao and CJ Bio have restarted their L-valine production lines, increasing supply, the extent of the price increase may be limited. Prices of L-lysine sulfate have also begun to recover, while prices of L-lysine HCL and L-threonine have stopped falling and started to rebound.

Recommendations

In light of these developments, it is advisable to closely monitor the future trend of soybean meal prices. For those looking to capitalize on potential price corrections or aiming to buy at lower prices, it is recommended to start batch purchases gradually.