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Global feed additives use seen climbing while Europe struggles
Last year, the various factors pummelling poultry and swine producers — from animal diseases to sky-high input costs to depressed Chinese consumption — resulted in a sizeable drop in demand for many feed additives at a global level. While a few of those factors have receded — energy costs, or the zero-COVID policy in China, for example — others, such as stricter environmental or animal welfare regulations eating at margins, the continued pressure of highly pathogenic avian influenza (HPAI) or African Swine Fever (ASF), or the ongoing inflationary environment, continue to weigh on the sector.
Where, precisely, does that leave feed additive demand in 2023? Fresh off the latest round of updates to Feedinfo’s Supply & Demand Pro service, Principal Analyst Sam Weatherlake walks us through the most recent estimates for global and Chinese consumption of various vitamins and amino acids, and also shares what the market is saying about the potential for recovery in Europe, an area which has seen a starker decline than most over the last few years.
Amino Acids
Feedinfo projects an increase of 3.2% in global methionine consumption in 2023, revised down from the previous forecast of plus 3.7%.
Meanwhile in China, consumption growth of 3.5% is forecast for 2023 following the relaxation of stringent COVID-19 restrictions. It is also perhaps worth noting that the country became a net exporter for the first time in 2022. Operating rates are projected to fall each year until 2025 as new capacity comes online but will then rise rapidly to meet increasing global demand.
For global lysine HCl consumption, we project an increase of 2.6%, down from the previous forecast of plus 3.6%.
Chinese consumption growth of 3% is forecast for 2023 for both lysine HCl and lysine sulphate. Close to 400,000 tonnes/ year of lysine HCl equivalent capacity is set to come online in mid-2023 to early 2024. Lysine HCl exports are projected to resume their upward trend in 2023-24, even as the growing pork and poultry sectors drive up domestic consumption. Lysine sulphate exports are forecast to continue rising rapidly as more volumes become available.
Feedinfo anticipates an increase of 2.1% in global threonine consumption this year, revised down from the previous forecast of plus 3.2%.
Chinese consumption growth of 2.5% is forecast for 2023. Exports are projected to be lower over the next few years due to weaker global demand and increased capacity in other regions. As a result, production volumes are set to fall in 2023-24 despite plans for a large new plant to start up in mid-2023.
Finally, Feedinfo projects an increase of 3.7% in global tryptophan consumption, which is modest by the standards of the past decade. This reflects the expected stabilisation of the Chinese pig herd, the lack of spare capacity at CJ’s Indonesian plant, and Chinese producers’ struggle to remain cost competitive.
Chinese consumption growth of 5% is forecast for 2023. The country was a modest net exporter until 2021, when it became a net importer. China developed a large deficit in 2022, although this is projected to stay close to 10,000 tonnes per year as the country’s growing demand is met mostly by domestic supply.
Vitamins
Feedinfo projects an increase of 5.6% in global vitamin A consumption in 2023 (calculated on a vitamin A 1000 basis), revised down from the previous forecast of plus 8.5%.
Chinese consumption growth of 5% is forecast for 2023. The forecast assumes that operating rates at BASF’s Ludwigshafen site will rise progressively as the site’s long-running technical problems are resolved and new capacity is utilised from mid-2023. Chinese production and exports are projected to decline throughout the forecast period as BASF accounts for a greater share of global consumption.
The market dynamics for vitamin A have diverged from other products in recent years owing to a series of incidents that have reduced BASF’s output at Ludwigshafen going as far back as October 2017. The cumulative effect of these developments is that consumers have not returned to the inclusion rates that were standard before the price spike of 2017-18. Feedinfo’s forecast also assumes that vitamin A 1000 inclusion rates will begin to rise towards historical levels as global availability improves.
For vitamin E consumption, we now anticipate an increase of 3.1%, revised down sharply from the previous forecast of plus 6%.
Chinese consumption growth of 5% is forecast for 2023. Export volumes dipped in 2022 owing to weaker overseas demand but are expected to recover this year. In the longer term, exports are forecast to rise in line with increasing global consumption.
Finally, Feedinfo projects an increase of 3.1% in global vitamin B2 80% consumption in 2023, revised down from the previous forecast of plus 4.2%.
Chinese consumption growth of 6% is forecast for 2023. While the forecast assumes that China’s excess capacity will be used to meet rising global and domestic demand, the country’s exports are set to fluctuate over the next few years as it faces competition in overseas markets.
Feedinfo’s Supply & Demand Pro has also revised its global consumption estimates for 2022. Nearly all of these revisions indicate that the drop in global feed additive consumption 2022 was less than previously thought — indeed, in methionine’s case, we now believe there was very slight growth. The only exception where consumption was calculated lower than previously estimated for 2022 was vitamin B2.
Views From The European Market
In Europe, the fall in compound feed production in 2022 was matched by decreases in feed additives consumption, although the impact varied by product and region. Feedinfo’s most recent estimates reckon that use of amino acids and vitamin E in Europe declined by 5-6%, while vitamin B2 dropped 7.6% and vitamin A fell 10.7%.
Premixers were hit particularly hard as farm managers who manufacture their own feed cut back on high-cost inputs, adjusting their formulations to reduce feed additive inclusion rates. In some cases, these trends have continued into 2023, with one premixer saying it expected to produce 10-15% less volume this year compared to 2021.
One trader said the picture was even bleaker than it had been at the end of 2022, with compound feed manufacturers and premixers facing severe insecurity and pig farmers in northwest Europe struggling to maintain viability in the face of costly investments needed to meet new regulatory standards. The source projected that feed additives consumption could fall by 5-6% in 2023. Another trader was anticipating a recovery in the French poultry industry this year but said that pork production would likely fall by 3-5% in Germany, Belgium, and the Netherlands. Spain also faced losing some market share, it suggested.
A reseller said that amino acids demand fell sharply in 2022 and had not yet stabilised, although the pace of decline had slowed. Many pig farmers ceased operating last year due to poor profitability, it explained, and while moderating costs meant that the situation was likely to stabilise, it did not expect the sector to recover to previous production levels given weaker domestic demand and uncompetitive exports. However, the source anticipated that poultry production would pick up as HPAI increasingly came under control.
A vitamins producer confirmed that it had seen a “high singledigit decrease” in European consumption for 2022, with western Europe down by 10-15%. The source said it was expecting to see a recovery in 2023 but H1 was proving to be slow and it was hoping for a stronger H2. While it did not anticipate that European vitamins demand would be structurally lower overall, the producer said it was expecting to see a redistribution from western Europe to other parts of the continent.
A feed additives producer said that demand was returning “slowly but surely”, with the poultry industry being “back on track” but the pork sector continuing to decline. The source said it was seeing slightly higher demand for 2023 compared to last year and expected this trend to continue into the second half of the year. “This is valid for all animal species except pork. Pork will need to time to recover, if possible to recover at all, as regulations make it almost impossible to run a profitable business”, the producer noted.
By Sam Weatherlake, Principal Analyst
