China's grip on key food additive
Vitamin C prices have spiked this year. China controls 80 percent of the market.
from the July 20, 2007 edition
Page 2 of 4
Production has fallen, say manufacturers, because they are now being forced to abide by environmental standards that were applied only sporadically before.
"Some vitamin C producers have stopped production" to limit the waste water emitted, explains Kong Tai, former CEO and now board member of Jiangshan Pharmaceutical, one of the four big producers. "In some areas, the authorities limit the total amount of annual pollutant emission, so if you have reached that ceiling you cannot go on producing."
"The government has gone from turning a blind eye to complete panic and has blitzed the largest companies they can find and told them to do something quickly," adds David Townsend, the representative in China of DSM, which manufactures vitamins other than vitamin C in China.
"The vitamin C companies have been caught up in this," he adds.
The Chinese may also have cost pressures. One of the base materials for ascorbic acid is corn-based. The US cash price of corn is up 44 percent this year, a result of increased use for ethanol. Corn starch is used to make a form of glucose, some of which China imports to make vitamin C. China imports some of this base material. "The Chinese are not insulated from it [the price rise]," says Mr. Hepner.
Pollution controls and corn prices may not be the only factors in the rise, however. Within the industry, says Mr. Townsend, "it is widely known that prices of the companies here tend to be very similar and price hikes tend to occur at the same time. Certainly there is something going on … that leads to pushing prices up."
The four major Chinese vitamin C producers are currently facing an antitrust suit filed in the Eastern District of New York by two US companies as a class action suit. The suit alleges the four Chinese companies have established a cartel that "has affected hundreds of millions of dollars in commerce in products found in nearly every American household."
Among court documents are records from the China Chamber of Commerce of Medicine & Health Products Importers and Exporters citing how manufacturers were able to reach a self-regulation agreement to control the quantity and pace of exports "to achieve the goal of stabilizing and raising export prices."
The chamber makes no secret of its intentions on its website, where its regulations are posted. Among the organization's purposes, it says, is to "coordinate the import and export price" of pharmaceuticals "according to government authorization or the common requirements … of member companies."
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