For the Quarter Ending September 2023
The prices of Arginine experienced a notable decline in July, followed by subsequent increases in both August and September. During the month of July, the volume of new orders and sales experienced a decline due to the persistently feeble state of both domestic and international demand. The Federal Reserve hiked its key policy interest rate by a quarter percentage point in July, the highest level in 22 years, reducing overall demand in the economy and supporting the downward trend. However, prices climbed in August and September due to an increase in energy prices, which boosted overall business expenses and transportation costs, resulting in an increase in Arginine pricing. Gasoline prices rose as Russia and Saudi Arabia resumed aggressive supply cutbacks, driving crude oil to a 10-month high of $91 per barrel. Furthermore, imports from major exporting countries such as China fell, reducing the supply of Arginine in the US market and driving up prices. Market participants prioritized inventory replenishment, which contributed to the rise in Arginine prices.
Arginine prices fell by 2.03 percent in July, then increased by 4.43% and 14.32% in August and September, respectively. Arginine prices continued to fall in July, as industrial activity slowed and demand from downstream sectors fell. The official manufacturing PMI (Purchasing Managers Index) was 49.3 in July, suggesting that factory activity in China contracted for the fourth consecutive month due to reduced overseas orders and insufficient domestic demand. Arginine prices rose in August and September as a result of an improvement in end-consumer demand amid restricted supply in the market due to the industrial sector's sustained downturn for the fifth consecutive month. Furthermore, because to economic concerns, China's central bank reduces its key interest rate, which helps to stimulate market consumption, rising Arginine prices in China. In September, China's manufacturing purchasing managers' index (PMI) gently climbed back into the expanding zone, exposing the restart of factory activity and signaling a promising economic revival within the country. With the termination of Q3, the prices settled at USD 5468/MT FOB Shanghai.
Arginine prices fell by 0.68 percent in July, then surged by 4.81% and 10.95% in August and September, respectively. Arginine prices fell in July due to a slowdown in business activity and a fall in downstream industry demand. The steep drop in demand for goods can be linked to a number of factors, including customer hesitancy, destocking, and increasing borrowing rates, as well as tightening market circumstances and economic and geopolitical uncertainty. Prices increased in August and September as a result of continuous inflation, rising interest rates, and the energy crisis. In August, the German inflation rate was +6.1%, as measured by the year-on-year change in the consumer price index (CPI). Food and energy prices have grown faster than average inflation, contributing to high inflation. Prices for energy products increased 8.3% year on year, following a 5.7% increase in July. Businesses' expenses and operational cost rise as a result of the persistent high inflation, adding to increasing Arginine prices in Germany. With the termination of Q3, the prices settled at USD 6477/MT CFR Hamburg.
For the Quarter Ending June 2023
The North American L-Arginine market showed an unflattering price picture in the second quarter of 2023. Significantly lower demand for L- Arginine in the United States, owing to high inventories held by downstream nutraceutical companies, was the main reason for the significant price decline in the country. Nevertheless, due to differing views on the cost of dietary supplements, the nutraceutical sector in the country has shown a fragmented pattern of market activity. Given that there has been a drop in inflation since April, experts also believe that this is due to the easing of supply chain pressures and is only of short duration. The country's domestic market for dietary supplements has been a mixed bag, with the cost of every other product, including other amino acids, varying. On the other hand, rising labour costs could keep inflation high, which could lead to another interest rate hike by the Fed in July. With the state of the US economy still unknown, market participants in the food and dietary supplement industries are still on the fence.
The Asia-Pacific market for L-Arginine experienced a sharp decline in the second quarter, with price negotiations in China falling from $5141 per tonne to $4675 per tonne FOB Shanghai between April and June. This price decline started early in the quarter in China and became quite persistent midway through, as downstream nutraceutical demand for L-Arginine dropped significantly globally and domestically. As a result of the drop in demand and consumer enquiries, Chinese L-Arginine manufacturers have been forced to sell the product at much lower margins. According to the statistics, China's manufacturing activity contracted for the third month in a row in June, though at a slower rate. The statistics are being revealed as pressure mounts on the government to expand intervention spending in order to support an economy that is flattening out after an initially strong comeback in the first quarter of 2023 following the COVID crisis. The country's pharmaceutical and nutraceutical industries are coming under further pressure, according to the June PMI, which also revealed a number of imbalances and weaknesses, including declines in both domestic and external demand, an accelerating decline in business activity and continued losses in both.
In line with markets around the world, the European L-Arginine market was also quite unfavourable in the second quarter, with price negotiations falling in the German market. A combination of lower demand from the downstream sector and high supplier inventories was one of the main reasons for this price decline in Germany. In Europe, the price of gas as an energy source has fallen to its lowest level since the beginning of the crisis in April. This increased optimism for a more significant economic recovery, which undoubtedly benefited trade with Asia, but low demand for carnitine did not favour the market. However, a sudden rise in unemployment in Germany in June had a significant negative impact on market sentiment. L-Arginine was stockpiled by retailers to avoid future shortages. This led them to reduce their price margins later in the quarter to clear their inventories. Although the country's L-Arginine sector has not yet been affected, German inflation climbed back above 6% in June. Market participants are reeling and, like the rest of the world, remain sceptical about the country's economic situation.
For the Quarter Ending March 2023
Arginine displayed solid market dynamics with minimal variation in the first quarter of 2023. As Q1 2023 got underway, prices increased through the end of February, supported by continuous purchases from the pharmaceutical and nutraceutical end-user sector. Also, the ease of trade disruption supported the arginine market trend from January. Moreover, the Euro currency dropped versus the USD in January, affecting the mood of the market. Furthermore, by the end of Q1 2023, prices had decreased because there were few inquiries and sufficient supplies among the merchants. Low freight costs also contributed to the market's current state of weakness.
Arginine prices witnessed an increasing trajectory in the APAC region in the first quarter of 2023. After the Lunar New Year break, the Chinese pharmaceutical markets technically returned on a positive note with an increase in orders and shipments from both the domestic and the international market. As the market was reopened, factory and port operations resumed. Also, with the soaring offtake and increase in the no. of international orders, Arginine prices increased in the Chinese market. Later, the prices did stabilize and rolled down at the commencement of February 2023, as the strict Covid laws lifted, revitalizing the second-largest economy in the world. Also, the recovery of production quickened, along with the feeble demand kept the market weak. At the termination of Q1 202, the settlement price of Arginine API accessed at USD 5261/MT FOB Shanghai with an average quarterly declination of 1.69%.
In the first quarter of 2023, Arginine showcased stable market dynamics with slight fluctuation. With the commencement of Q1 2023, the prices rose till the end of February, backed by consistent offtakes from the pharmaceutical and nutraceutical end-user sector. Further, the ease in trade disruption reinforced January's market trend of Arginine. Also, the Euro currency apprenticed against the USD in the month of January, influencing the market sentiments. During the month of March, the settlement price of Arginine API came down to USD 6414/MT CFR Hamburg with an average quarterly inclination of 1.52%. Moreover, by the termination of Q1 2023, the prices dropped by approx. 3% as the inquiries remained feeble, and the merchants had enough supplies among them. Also, low freight charges further supported the weak market situation.
For the Quarter Ending December 2022
North American region, primarily the United States market, the prices of Arginine plummeted during the final Quarter of 2022. With the start of the fourth quarter er, the prices increased considerably. The prices witnessed an increment during the first half of the fourth quarter due to rising inflation, numerous logistic issues, and higher manufacturing cost in the export country. Additionally, prices began to drop progressively in the middle of the fourth quarter because fewer inquiries kept the stocks at their highest levels later in December. Also, with ease in inflation and other logistics, the prices decreased in the month of December.
The prices of Arginine in the Asia Pacific region, majorly in China, demonstrated mixed market sentiments throughout the fourth quarter of 2022. Although, in October, the prices for Arginine inclined considerably. Following November, the official manufacturing purchasing managers index (PMI) fell to 48.0% in November, slipping well below last month's reading of 49.2, along with reducing inquiries that kept the prices of Arginine on the lower side. Also, lowering end-user sector demand and enough inventories among the market players further supported the market trajectory in the APAC region. Ease in strict zero covid policies also kept the market situation feeble towards the end of Q4 2022. Towards the end of Q4 2022, the price of Arginine was recorded at USD 5554/MT.
Prices for Arginine in the European region showed a see-saw tendency in the fourth quarter of 2022. In the first two months of Q4, the demand for Arginine in the downstream pharmaceutical industry was seen to be steady. The supply chain was impacted by the continuous port congestion and supply disruption in the European region, which forced an increase in pricing. High freight costs were another factor in Arginine's upward trend. Due to the impending holiday season, European retailers have decided to refill their stocks in large quantities. However, because of existing stocks and declining end-user sector demand in December, prices declined. Towards the end of Q4 2022, the price of Arginine was recorded at USD 6139/MT.
The third quarter of 2022 saw a decline in the market trend for Arginine, with CFR Los Angeles values dropping from $6250/mt to $5940/mt from July to September. Because of China's zero-covid policy, imports of several amino acids into the US were heavily restricted, Arginine. Due to the heat wave and a power shortage, several Chinese industrial facilities were forced to shut down in the second half of Q3, which had a detrimental impact on US business. The nation's declining demand was attributed to a number of issues by various businesses and experts, including inflation, supply shortages, and the country's high-interest rates.
In China, with FOB Shanghai values falling from $6080/mt to $5700/mt from July to September, the market trend for Arginine in the Asia Pacific area showed a negative tendency. This pricing pattern has been influenced by a number of factors, including fluctuating raw material costs, sluggish consumer spending, and weak end-user sector demand. Due to the slow offtakes and weak downstream demand during the first half, big suppliers delayed making significant orders. Following the shutdown, various manufacturing facilities, including Vega Pharma, Prumix, and others, were undergoing maintenance when the markets reopened in the last week of July. This had an influence on the product supply for both domestic and foreign suppliers throughout the second half of the quarter. Extreme weather and economic factors have also negatively impacted the market dynamics in China this quarter.
In the German domestic market, the CFR Hamburg negotiations dropped from $6180/mt to $5770/mt from July to September 2022, continuing a decreasing trend over the third quarter. In addition to the upheaval in Russia and Ukraine, the on-and-off port restrictions in China exacerbated the already challenging economic environment in Europe. Furthermore, this quarter saw a weak demand from the food and feed sectors. Offtakes in the end-user industries for the demand during this quarter ranged from low to stable.