Zhongtong Finance and Economics APP learned that Sinolink Securities released research reports stating that on October 17, the German chemical giant BASF announced that the time for resuming production of related products affected by the explosion event has been adjusted. According to the current plan, it is expected that the production of Vitamin A will resume in early April 2025. Along with the delay in the resumption time of BASF, the overseas supply contraction period will also be extended. On the domestic supply side, several domestic companies stopped production for maintenance in July and August while some overseas companies stopped production due to force majeure, causing a significant increase in prices with fast elasticity. However, as the maintenance of domestic companies gradually ends, product prices are beginning to fall.

Sinolink Securities' main points are as follows:

Event

On October 17, the German chemical giant BASF announced that the time for resuming production of related products affected by the explosion event has been adjusted. According to the current plan, it is expected that the production of Vitamin A will resume in early April 2025, and the production of Vitamin E and carotenoids will resume in early July 2025. The company is also actively seeking to accelerate the repair speed without compromising safety. In addition, BASF is actively looking for key intermediates required for vitamin production to alleviate the impact on the production of vitamins and carotenoids.

Export data continues to improve, with strong support from the demand side.

Vitamin E is widely used in clinical, pharmaceutical, food, fodder, health products, and cosmetic industries, with animal fodder being the largest demand market for Vitamin E, accounting for nearly 70% of demand. With the recovery of the pig cycle providing strong support for the demand for Vitamin E, and the improvement in profitability in the farming industry, downstream acceptance of prices for additives such as vitamins has also increased. From the perspective of export data, the export demand in the second half of this year continued the strong trend of the first half of the year, with China exporting 7,055 tons and 10,029 tons of Vitamin E in July and August respectively, with year-on-year growth rates of 24% and 50%. From January to August this year, China's total export volume of Vitamin E was 72,000 tons, a 31% increase year-on-year.

The domestic corporate landscape is relatively stable, and the delayed resumption of overseas facilities is expected to continue tightening the supply side.

According to the data from Baichuan Yingfu, currently only four domestic companies, namely Zhejiang NHU, Yitman (Nengte Technology), Zhejiang Medicine, and Beisha Pharmaceutical, have the production capacity for Vitamin E, with a total combined capacity of 0.095 million tons, and several companies currently have no plans for additional capacity. Considering that domestic companies generally undergo maintenance in the summer, the actual capacity that can be utilized throughout the year is relatively limited. The annual production of Vitamin E in China fluctuated around 0.065 million tons from 2021 to 2023, with an overall capacity utilization rate of less than 70%.

On the overseas front, looking back at the events involving BASF, on July 29th a sudden explosion occurred at BASF's Ludwigshafen plant in Germany, on August 7th the company announced that the supply of Vitamin E products was affected by force majeure, on August 21st the company announced that Vitamin E is expected to be difficult to resume production before January 2025, and on October 17th the company further postponed the resumption of production to July 2025. With the delay in BASF's production resumption, the period of overseas supply contraction will also be prolonged.

Product prices may experience a temporary phase of decline, but with an improvement in supply and demand, prices are likely to continue rising.

As of October 17, 2024, according to Boya and Xun, the market quote for Vitamin E is 125 yuan/kg, a 23% decrease from the peak of 162.5 yuan/kg in August, but still a 110% increase compared to the beginning of the year. The fundamental support for this round of price increase is relatively strong, with demand gradually recovering along with the revival of downstream farming, and robust export demand. While several domestic companies stopped production for maintenance from July to August, and overseas companies faced unavoidable halts, the price went up rapidly with significant elasticity. However, as domestic maintenance ends gradually, product prices are beginning to decline. Considering that the overseas supply contraction period is longer than originally expected, it is expected to provide strong support for the prices of Vitamin E products.

Investment suggestion: Against the backdrop of strong support from the overall supply and demand fundamentals in the industry, the short-term supply contractions are expected to drive further increases in the prices of Vitamin E products. The revenue and profitability of companies with Vitamin E production capacity are expected to improve, further boosting their overall performance. It is recommended to focus on Zhejiang NHU (002001.SZ) and Zhejiang Medicine (600216.SH), which have the production capacity for Vitamin E.

Risk warning: Weaker-than-expected downstream demand, accelerated industry expansion, significant increases in raw material prices, and stricter policy controls.