Price increase of 110%, Sinopharm, ushering in great wealth and prosperity!

(Source: Langge Finance)

Chemicals are ushering in a wave of price increases.

As an important upstream raw material for the chemical industry, the rising price of petroleum has driven the rapid increase in prices of fine chemical products such as vitamin A, vitamin E, methanol, and methionine.

On March 20, the average price of methionine was 39.5 yuan/kg, an increase of over 111% compared to the previous month; the average price of methanol was 2432 yuan/ton, reflecting a nearly 28% increase compared to last month.

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In this round of price increases, Xinhecheng is expected to be the biggest winner.

Xinhecheng’s revenue is composed of emerging products such as vitamins, methionine, and flavor and fragrance materials. Each of the three business segments has its own advantages, but they are also products that naturally emerge from the company’s integrated industrial process.

So, what strengths does Xinhecheng actually have? What impact will this wave of price increases in the chemical industry have on the company?

Vitamins A and E

Leading domestic production capacity

When mentioning Xinhecheng, it is hard not to think of vitamins.

The company is one of the major vitamin producers in the world, capable of producing 8 out of the 13 common vitamins, including vitamins A, E, and C, as well as products like VB5 and VB6.

Producing vitamins is not easy. Although vitamin A is often mentioned in daily life, its synthesis involves complex reactions and many processes, with very few companies globally capable of mass-producing the key intermediate, citral, making vitamin A one of the products in the chemical industry with the highest technical barriers.

As early as 2006, Xinhecheng developed citral, breaking the overseas monopoly. By the first half of 2025, the company’s citral production capacity is expected to reach 8000 tons/year, eliminating the need to rely on external procurement for vitamin A, showcasing its integrated advantages.

As of the first half of 2025, Xinhecheng’s global market share for vitamin A is expected to reach 13%, ranking second globally, only behind BASF.

Citral is also a key intermediate for vitamin E. The company has adopted an isophorone process, successfully achieving the domestic first industrialization of the main ring of trimethylhydroquinone and the side chain of isoprenol, thus gaining a cost advantage. By the first half of 2025, Xinhecheng’s vitamin E production capacity is projected to reach 60,000 tons/year, with a market share of 23%, making it the largest producer globally.

High technical barriers effectively deter potential entrants, and the global market for vitamins A and E is quite concentrated, with the CR3 exceeding 50% and the CR5 exceeding 70%. (CR3: the total market share of the top three companies in the industry)

This leads to a situation where product prices are greatly affected by the supply side.

More specifically, the production capacity and operating rates of leading manufacturers like BASF, Xinhecheng, and Adisseo will directly impact the prices of vitamin products. In 2017, when BASF’s citral facility experienced an accident, the prices of vitamin A and E showed a significant dual increase trend.

Although Xinhecheng has stabilized costs through strategic procurement, centralized purchasing, and long-term cooperation, the company’s performance is inevitably affected, with fluctuations being the norm.

From 2017 to 2018, Xinhecheng’s net profit grew from 17.014 billion to 3.098 billion, and in 2019 it dropped to 2.173 billion.

In the past two to three years, with the expansion of its methionine and flavor and fragrance businesses, the company’s revenue has steadily progressed, successfully breaking the 20 billion yuan mark in 2024. However, it still cannot completely avoid fluctuations in net profit; between 2021 and 2024, Xinhecheng’s profit curve showed a “reverse U-shaped” change.

This profit fluctuation is actually not a big deal.

First, although the prices of vitamins A and E are prone to change, Xinhecheng has not fallen into a loss situation; it is merely a matter of “earning more or less,” which is different from the consequences caused by changes in lithium carbonate or photovoltaic component prices.

Second, the price center for such chemical products is still dominated by technology, and there is rarely any new external production capacity entering the industry, making it unlikely for the company to be passively involved in price wars. When prices rise, Xinhecheng, as a leader in a niche sector, is expected to be the first to enjoy the benefits of price increases.

Therefore, regardless of how prices change, the technical barriers and advantages of integrated scaling ensure that Xinhecheng remains invincible.

Methionine and Other Businesses

Opening a Second Growth Curve

Relying on the two core technologies of “chemicals” and “bio+”, Xinhecheng has grown rapidly.

Currently, the company’s product pipeline has extended from an early relatively single vitamin business to the fields of methionine, flavor and fragrance, and bio-chemical new materials.

It must be said that the expansion of the methionine business is a successful attempt by Xinhecheng.

Methionine is one of the essential amino acids for the growth of piglets and laying hens, and it cannot be synthesized by the organism itself, only obtained through external means such as feed additives. If 0.2% methionine is added to each unit weight of feed, it can save 23% of production costs for every kilogram of finished chicken meat, effectively increasing profitability in the poultry industry.

Moreover, the technical barriers for methionine are even higher.

Compared to vitamins, the market competition landscape for this product is more concentrated. By the first half of 2025, the combined global production capacity of the three major companies, Evonik, Adisseo, and Xinhecheng, will account for an astonishing 74%. Domestically, only Xinhecheng and a few companies like Hebang Bio have mass production capabilities.

Currently, Xinhecheng has a solid methionine annual production capacity of 370,000 tons, and in the second half of 2025, its joint venture with Sinopec to build a liquid methionine project with an annual capacity of 180,000 tons has been put into production, bringing total solid and liquid methionine capacity to 550,000 tons.

After reaching capacity, the company is expected to become the third largest methionine producer globally by 2027. In the long term, foreign companies have weaker cost advantages, and global supply is likely to continue shifting to domestic production.

Leveraging its technical accumulation in the chemical industry, Xinhecheng is also developing in the new materials sector.

Hydrogen cyanide is a key intermediate for methionine and is also one of the raw materials for PPS materials. Isovaleraldehyde is an upstream raw material for vitamin E and is also a precursor for the production of flavor and fragrance products. By the end of 2024, Xinhecheng’s PPS capacity is expected to rank first in China, with annual PPA output reaching the kiloton level.

From the perspective of capacity distribution, as of the first half of 2025, the company has four modern production bases in XinChang, Zhejiang, Shangyu, Zhejiang, Weifang, Shandong, and Suihua, Heilongjiang, for the production of vitamins, astaxanthin, flavor and fragrance products, etc.

In summary, the methionine and other new materials businesses are becoming new sources of income and profits for the company.

In Conclusion

Xinhecheng holds a leading position in multiple segments of the chemical industry. The price increases of chemical products such as vitamin A, vitamin E, and methionine are expected to bring substantial wealth to the company.

After years of operation, Xinhecheng has launched new businesses such as methionine and flavor and fragrance that contribute profit increments, alleviating the impact of price fluctuations in vitamin products on the company’s profit performance.