On July 19, the Association of Grain Deep Processing Enterprises organized a press briefing dedicated to the problems of production and marketing of amino acids. As a result of the briefing, proposals from the Association and enterprises will be formed and sent to the sectoral departments.
Speakers at the meeting were Oleg Radin, President of the Soyuzkrakhmal Association; Alexander Petrov, General Director of JSC "AminoSib"; Alexey Balanovsky, General Director of CJSC Premix Plant No. 1; Andrey Freiman, head of the sales department of Volzhsky Orgsintez JSC and Vasilina Akhramovich, director for economics and finance of the Belarusian National Biotechnological Corporation CJSC.
There are two plants for the production of lysine in Russia - Aminosib LLC and Premix Plant No. 1 CJSC. Their total productivity is currently more than 120 thousand tons of L-lysine sulfate per year. Thus, domestic enterprises provide more than 70% of the need for this amino acid. CJSC "Belarusian National Biotechnology Corporation" is implementing an investment project, upon reaching its full capacity, dependence on imported lysine can be eliminated by 100%. JSC "Volzhsky Orgsintez" can cover 50% of the internal demand for methionine.
Due to the zero import duties on the territory of Russia for five months of this year, the import of lysine amounted to about 40,9 thousand tons, of which 9,2 and 31,7 thousand tons in the form of sulfate and monohydrochloride, respectively. This is actually equal to imports for the whole of 2021 - about 41 thousand tons. In addition, from July 1, the Government of Russia decided to temporarily ban the export of a number of amino acids until the end of this year. This decision deprives enterprises of the opportunity to sell surplus products on the international market.
Since the beginning of this year, the price of amino acids on the Russian market has fallen by more than 40%. This happened not only because of the strengthening of the ruble, but also because of the active growth in the volume of imported products. This situation has a negative impact on the economic performance of domestic industries, which are forced to sell products at the cost level. As a result, this can lead to the suspension of the activities of enterprises.
Alexander Petrov, General Director of JSC AminoSib, explains: “We really need support from the state. In the event of a large excess of lysine in Russia, we will fill our warehouses, and the only thing left for us is the suspension of the plant. Biotechnology projects have long payback periods, which does not allow domestic producers to fully compete with importers. The construction of our factory began in 2013. To date, we have not paid back our project, according to our estimates, this will not happen before 2025.”
Aleksey Balanovsky, General Director of CJSC Premix Plant No. 1, comments: “The current situation hinders the development of the biotechnological industry as a whole, reduces the investment attractiveness of the industry. On the part of producers, our three enterprises, Premix Plant No. 1, AminoSib and BNBK, are ready to give exact figures for the next year, what volume of production we are ready to provide. According to our data, three enterprises can fully cover the needs of the EurAsEC countries. “Premix Plant No. 1” is ready to produce 96 thousand tons of 75% L-lysine sulfate next year, where the pure substance is 60,5 thousand tons.”
Andrey Freiman, head of the sales department of JSC Volzhsky Orgsintez, which is the only producer of methionine in Russia, explained the situation with this amino acid. “In early spring, we assured the Ministry of Agriculture and the Ministry of Industry and Trade that we could cover 50% of the domestic demand of the Russian methionine market. We also completely restricted exports on our own. However, customs duties on methionine and other amino acids were still set to zero. In addition, the current situation is exacerbated by the exchange rate. If the dollar exchange rate is at the level of 50 rubles or less for three months or more, then in this situation we will have to stop the production of methionine,” Andrey Freiman said. “At the moment, there is no shortage of methionine in the domestic market. In a month and a half, the import of methionine from Europe was completely replaced by Asian producers,” he comments.
Vasilina Akhramovich, Economics and Finance Director of BNBK CJSC, spoke about the situation in Belarus: “In the spring, we sent several letters to the Ministry of Agriculture and Food with the justification that there was no need to reduce import duties. BNBK is reaching full capacity, we are closing the first production year. The capacities of our enterprise, together with existing plants, allow us to fully cover the needs of the EAEU countries for lysine. As far as we know, the Ministry of Agriculture and Food forwarded these letters to the EEC.”
Vasilina Akhramovich also shared the Belarusian experience of interaction with regulatory authorities: “Together with the Government of the Republic of Belarus, we have developed the following work mechanism for the near future. The Ministry of Agriculture and Food has formed a list of target enterprises-consumers of amino acids that are guaranteed to buy amino acids from BNBC and do not resell them to the market, that is, for their own needs. We sell products to this list at a special price agreed with the Ministry of Agriculture and Food. Further pricing is being formed at the Belarusian Universal Commodity Exchange.”
FAQ
What are the long-term consequences? Is there any other harm that cannot be quantified?
Alexander Petrov, General Director of JSC AminoSib: “Our factories produce a range of related products. We work on a waste-free principle. Therefore, without the production of lysine, we will stop other product lines.”
Aleksey Balanovsky, General Director of CJSC Premix Plant No. 1: “There are about 1000 employees at our plant, while we indirectly provide for dozens of small enterprises that employ about two thousand people. The shutdown of our facility will affect all of these companies.”
Andrey Freiman, head of the sales department of Volzhsky Orgsintez JSC: “We also produce a wide range of products. And stopping the production of methionine will affect the work of the enterprise as a whole. Our plant employs 1500 people, and indirectly we involve hundreds more people who cooperate with Volzhsky Orgsintez. We are a city-forming enterprise and the largest taxpayer in the region. All of the above will have serious implications for a region that is subsidized.”
How do consumers feel?
Andrey Freiman, head of the sales department of Volzhsky Orgsintez JSC: “Consumers are now feeling great, as prices are now falling. But if local production is closed, when there is no competition, everything can change.”
Aleksey Balanovsky, General Director of CJSC Premix Plant No. 1: “Amino acids occupy a very small share in the cost structure. For example, lysine takes 20 kopecks at a cost of 150 rubles per kilogram of meat. Even if lysine doubles, our consumers won't notice it. Lysine occupies less than 3% in the cost structure of compound feed”.
What is the most pessimistic forecast? What measures need to be taken?
Andrey Freiman, head of the sales department of Volzhsky Orgsintez JSC: “If all amino acid manufacturing companies are closed, Russia will again become completely import-dependent in this area. And if for some reason China stops exporting them to us, then we will be left without feed additives. The return of the duty and the lifting of the export ban is the simplest decision we expect from the Government. But at a low exchange rate, this measure will be hardly noticeable. Import quotas would make it possible to regulate the market with the benefit of all participants - producers, consumers and the state.
Oleg Radin, President of the Association of Deep Grain Processing Enterprises: “If the current situation continues without changes, then it is better to suspend the activities of enterprises. All manufacturers are unanimously convinced that the best measure today is import quotas. While this possibility is being discussed, businesses are asking for customs duties to be returned and exports allowed. These measures will allow enterprises to at least continue to break even in the event of an unfavorable exchange rate, which is impossible to predict.”
Press service of the Association "Soyuzkrakhmal"