According to Zhito Finance APP, Guosheng Securities released a research report stating that folic acid prices are rising rapidly and a turning point has been observed. On November 15, 2024, the average market price of folic acid was 210 yuan/kg, with a weekly increase of 19.32%, indicating a quick price surge. According to Baichuan Yingfu, on November 15, mainstream manufacturers are still suspending contracts and reporting, and there is tight supply, with the mainstream order price in the first-line market rising to 205-215 yuan/kg (before this round of price increase, the market mainstream order price was 172-176 yuan/kg), and some high quotes have been raised to 220-230 yuan/kg. Overall, the circulating inventory level in the folic acid industry is currently low, and the trend of price increases is likely to continue, as folic acid may have entered a turning point.

Zhongsheng Securities' main points are as follows:

Folic acid is an essential vitamin for the human body, and its demand is inelastic.

Folic acid (also known as vitamin B9), as an important carrier in one-carbon metabolism, is an indispensable nutrient for the human body. Folic acid participates in the daily metabolism of amino acids, as well as the synthesis reactions of pyrimidines, purines, and the main methylation agent S-adenosylmethionine (SAM). A deficiency of folic acid can lead to anemia, neural tube defects, decreased immune function, cardiovascular diseases, and a series of other issues. Furthermore, folic acid has significant effects on the healthy development of the fetus. It can promote the maturation of immature cells in the bone marrow, enhance DNA synthesis to promote brain development, and aid in the development of nerve cells and brain cells in infants and young children, achieving the effect of increasing intelligence. Benefiting from the growth in high-value human demand, global folic acid demand reached 2,100 tons in 2023, with domestic demand increasing from 310 tons in 2019 to 600 tons, a compound growth rate of 17.95%.

Folic acid has historically exhibited enormous price elasticity, with the last super boom increasing prices 18.4 times.

In 2015, some industry manufacturers significantly reduced production due to eco-friendly concept factors, coupled with rising raw material prices, leading to an extreme price surge for folic acid: prices increased from 160 yuan/kg in January 2014 to a peak of 3,100 yuan/kg in May 2015, resulting in a cumulative increase of 18.4 times.

After nearly a decade of silence, the inventory has been fully cleared, and the industry landscape continues to concentrate.

Folic acid commercialization has a history of about 30 years. Initially, folic acid was mainly produced in japan and europe. Due to increasing eco-friendly concept requirements, folic acid production capacity has gradually shifted to china. The booming market in 2015 attracted new players to enter, and from the second half of 2015, the industry's supply and demand gap continued to correct, leading to a decline in folic acid prices. Subsequently, the folic acid industry entered a nearly 10-year silence. Currently, the industry's inventory has been fully cleared, and the number of major domestic players has decreased from over a dozen before 2017 to 6-7 (including zhejiang shengda bio-pharm, tianxin pharmaceutical, xinfan pharmaceutical, niutang chemical, xinhong pharmaceutical, etc.), accounting for over 90% of global production capacity, and the actual landscape continues to concentrate.

The raw material trichloroacetone is concentrated and has high pollution, creating a bottleneck for folic acid.

There are 5 main synthetic methods for folic acid, among which two routes using 2-hydroxypropane-1,2-dial and 2,3-dibromopropanal as raw materials have been eliminated, and two routes using 1,1,3,3-tetramethoxy-2-propanol and 2,4-diamino-5-nitro-6-hydroxypyrimidine cannot be applied industrially. The most mainstream process route currently synthesizes crude folic acid using trichloroacetone, N-p-aminobenzoyl-L-glutamic acid, and 2,4,5-triamino-6-hydroxypyrimidine sulfate, which is then refined. This process has advantages such as cheap and readily available raw materials, convenient operation, and easily controlled reaction conditions. Among the three main raw materials, the bottleneck lies with trichloroacetone. Trichloroacetone is a strongly irritating liquid with a pungent odor and extremely high toxicity. Furthermore, the production process of folic acid generates a large amount of wastewater. All of these factors restrict supply.

Recommended to pay attention to: zhejiang shengda bio-pharm (603079.SH).

The company's vitamins sector focuses on folic acid and biotin. In the first half of 2025, biotin is expected to align with the folic acid market, and as a leading player in the global biotin market, the company will continue to benefit. Outside the vitamins sector, the company’s clean label sector is experiencing significant growth, with revenue in H1 2024 increasing by 143% year-on-year. Currently, the demand for food health in the european and american markets continues to escalate, leading to a booming clean label market, which is expected to become a long-term growth driver for the company.

Risk warning: downstream demand may not meet expectations, product prices may not meet expectations, and the competitive landscape may worsen.