The BASF Factory Explosion Triggered a Vitamin Storm: Prices of Vitamins A and E Soar, Disrupting the Industry Chain, With NHU And Zhejiang Medicine as Potential Winners

The explosion accident at BASF's factory in Ludwigshafen has escalated, foreshadowing a significant surge in the market prices of vitamin A and vitamin E. As a major global player in vitamin production, BASF's German base has an annual production capacity of 14,400 tons of vitamin A (equivalent to 50 million IU/g) and 20,000 tons of vitamin E (oil), accounting for 26.7% and 13.8% of the global market share, respectively. The incident has led to the temporary suspension of the production line for critical vitamin precursors, causing a significant impact on the company's vitamin production. Currently, the delivery of vitamin A and vitamin E is facing the possibility of delays or interruptions, and BASF has suspended product shipments since July 31, while evaluating its inventory status. The company stated that the affected equipment has been safely shut down, and the investigation into the cause of the accident is still ongoing, with the affected facilities under government supervision.

This event has led to a sharp rise in the prices of vitamin A and vitamin E in the Chinese market. The global supply of VA and VE is highly concentrated, with the industry's prosperity continuing to rise recently. There are only 7 global vitamin A producers, with BASF, NHU, DSM, Adisseo, and Zhejiang Medicine accounting for 26.7%, 14.8%, 13.9%, 9.3%, and 9.3% of the market share, respectively. After Evonik's integration with Adisseo, there are only 5 global vitamin E producers, with DSM (including Vetagro), NHU, Zhejiang Medicine, BASF, and Beisha Pharmaceutical accounting for 41.4%, 20.7%, 17.2%, 13.8%, and 6.9% of the capacity, respectively. The vitamin A market saw a price decline due to new capacity releases and weak demand since the first quarter of 2020, until it rebounded in late 2023. The current price is 125 yuan/kg, up 81.2% since December 2023. The vitamin E industry has seen a significant improvement in the competitive landscape due to the integration of DSM and Evonik, with the current price at 108 yuan/kg, up 103.8% since December 2023. Currently, China's major producers have suspended pricing and new orders, and some factories have completed the execution of their pending orders, indicating a strong willingness to raise prices on the supply side.

Huafu Securities' research report dated August 2 suggests that this accident may lead to a short-term supply disruption of vitamin A and vitamin E, thereby driving up product prices. The report mentioned that BASF is evaluating its inventory and has suspended deliveries since July 31. BAIINFO revealed that on August 2, most of China's major vitamin A producers and distributors have stopped quoting prices. On August 1, the market reference price for vitamin A rose to 170-180 yuan/kilogram, an increase of over 73% compared to July 30. The price of vitamin E reached 115 yuan/kilogram on August 1, up about 20% from July 30.

As major global producers of vitamin products, BASF's leading suppliers in China include NHU (002001.SZ) and Zhejiang Medicine (600216.SH). Since July 31, the share prices of NHU and Zhejiang Medicine have risen 8.6% and 20%, respectively. China's mainstream producers have currently suspended pricing and the signing of new orders, closely monitoring the subsequent impact of the BASF incident. Data shows that the VA price was 98 yuan/kilogram on July 30, 125 yuan/kilogram on July 31, and 150 yuan/kilogram on August 1, a 53% increase in two days; the VE price was 95.5 yuan/kilogram on July 30, 108 yuan/kilogram on July 31, and 115 yuan/kilogram on August 1, an increase of about 21%.

The investment strategy recommends focusing on NHU and Zhejiang Medicine. NHU has an 8,000-ton/year vitamin A capacity and a 30,000-ton/year vitamin E (oil) capacity, while Zhejiang Medicine has a 5,000-ton/year vitamin A capacity and a 20,000-ton/year vitamin E (oil) capacity. As industry leaders in China, they will significantly benefit from the rise in vitamin A and vitamin E prices, with significant earnings elasticity.