Chinese vitamin supply shortage drives up price

Retailers may have to start charging their customers more for dietary supplements containing vitamin C by the end of the year as manufacturers are forced to pass on higher prices from suppliers.

Prices for vitamin C are ballooning because of supply shortages out of China, the world's primary supplier, and the use of corn, a source of vitamin C for mass production, as a biofuel, said Ed Keenan, vice president of marketing at New York-based supplements manufacturer, FutureBiotics.

Keenan said Chinese suppliers claim they are shutting down plants to remodel them to meet Western standards of production. China supplies about three quarters of the global vitamin C market. "What they've done is squeeze production. They're holding back in their production," Kennan said of the Chinese production companies. "The whole industry is going to be hit by a severe shortage."

Chinese Customs Administration data showed ascorbic acid exports dropped 24 percent between April and May, from 6,537 tons to 4,857 tons. That was 14 per cent below the monthly average for the first six months of 2006. Ascorbic acid is a form of vitamin C commonly added to foods.

Reports put the price of a kilogram of bulk vitamin C at anywhere from $12 to $21 as of the end of July. In the first quarter of this year, China Daily reported the average price was only $3.55 per kilogram. The low prices had previously driven other competitors out of the market, culminating in 2005 with plant closures and cutbacks by two major European suppliers of vitamin C, and anti-trust lawsuits against Chinese firms by American companies.

One of the Chinese vitamin C producers told the Christian Science Monitor production is falling because the Chinese government is forcing companies to abide by environmental rules only loosely enforced previously. "Some vitamin C producers have stopped production" to limit the wastewater emitted, Kong Tai, former CEO and now board member of Jiangshan Pharmaceutical, one of the four big producers, was quoted as saying. "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."

Corn ethanol is another culprit affecting prices, Keenan said. BusinessWeek reported in March that the push for renewable fuels led to an outburst of ethanol plant construction, with 113 ethanol distilleries now in operation and an additional 78 in the works. That has pushed up demand for corn to the point that last year ethanol accounted for about one-fifth of the country's corn supply.

Keenan said he expects vitamin C shortages to cause a jump of about 20 percent to 25 percent at the cash register as early as this month and certainly by January 2008. "People will have no choice. They won't be able to supply it," he said. "That's the worst time, because that's when people start taking vitamin C, because that's the start of the winter months."

Keenan predicted it could take up to 18 months before consumers see prices drop, and that vitamin B and other letter vitamins would probably also experience price hikes.

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