China Has Near Monopoly On World Vitamin C Production
Vitamin C, also known as ascorbic acid, is a critical food preservative and a favorite vitamin all over the world.
But now 80 percent of it is made in one place in the world — a place that has come under fire recently for quality control. And there are concerns that with the price of Vitamin C rising and a near monopoly on its production and export, the world is now too dependent on this one country for this essential nutrient.
The county: China. And, in a special report, Christian Science Monitor reporters Ron Scherer and Paul Ford detail
China’s grip on this key vitamin and food preservative:
A sharp rise in the international price of vitamin C is focusing fresh attention on the risks of the world’s growing dependence on China for essential food supplies and additives.
China, which exports more than 80 percent of the world’s ascorbic acid – also known as vitamin C and a key food preservative – appears to have cut production over the past several months, pushing prices up by more than 200 percent to a four-year high.
Customers have scrambled for supplies of the additive, found in thousands of processed foods from fruit drinks to organic hamburger rolls, from applesauce to granola.
The production cutback follows a Chinese government drive to enforce pollution limits on chemical and pharmaceutical companies, sources in the vitamin industry say. The four biggest Chinese vitamin C producers are also facing a price-fixing suit in a New York court. Since January, prices have risen from $3.40 a kilo to $11 a kilo, according to industry sources.
The reduction in world supply comes in the wake of a series of scandals surrounding Chinese food and drug exports, some of which have been found to be tainted by poisonous chemicals. The Chinese have charged that US exports are tainted and have banned some of them as well. In the wake of the scandals, President Bush on Wednesday appointed an imports safety panel that will report to him in 60 days.
The Monitor report, which takes four pages on its website, details how extensive China’s near monopoly on Vitamin C is:
Though there appears to be no reason to believe that Chinese vitamin C is contaminated, the sudden shortage highlights another cause for concern over America’s growing reliance on Chinese food imports. Only one Western company, DSM of the Netherlands, still makes ascorbic acid, concentrating production in Scotland since shutting down its US plant two years ago. Chinese firms have driven all other competitors out of business.
“They have virtually captured the lot, unbeknown to most people,” says Leo Hepner, a London-based management consultant to the food and pharmaceutical industry. “It puts us in a very difficult situation if, say, they stopped making it.”
Even some nutrition experts are surprised to learn that most of the world’s vitamin C is produced in China. “We may need to figure out how it can be made closer to home,” says Mara Vitolins, director of public health at Wake Forest University Baptist Medical Center in Winston-Salem, N.C. “Our own food supply is sort of vulnerable.”
But China didn’t batter down other manufacturers to get in this enviable position. Some of it happened due to luck, and some due to the lower prices of its product, the Monitor reports:
Ironically, the Chinese became the dominant exporters of vitamin C only after the US Department of Justice charged six Western companies with price fixing in 1999.
The so-called “vitamin cartel,” which supplied 75 percent of the world’s vitamins, was convicted and ordered to pay $1.5 billion in fines and restitution. Some executives received jail sentences. One of the largest fines was against Hoffmann-LaRoche of Switzerland. It eventually sold its vitamin subsidiary to DSM.
Until two years ago, DSM produced ascorbic acid in New Jersey. But the market was flooded with Chinese-made vitamin C. The price dropped to as low as $2 per kilo. DSM shifted its production to Scotland.
While the firms of the “vitamin cartel” colluded, the Chinese vitamin C industry was growing. Chinese leaders decided decades earlier that increased production of vitamins was critical to their countrymen’s health. Chinese manufacturers were then well placed to take advantage of the breakup of the vitamin cartel, says Peter Kovacs, formerly CEO of NutraSweet Kelco and now a consultant to the food industry. They moved into the world market, taking market share by cutting prices, he says.
There’s more so read this excellent “enterprise” piece in full.
It’s a tale of how in the end U.S. manufacturers literally handed the market over to China. And it’s a clear instance where China has the U.S. and the world increasingly dependent on it.
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11 Responses to “China Has Near Monopoly On World Vitamin C Production”
[...] The Monitor report, which takes four pages on its website, details how extensive China’s near monopoly on Vitamin C is: (more…) [...]
The question is what to do about this problem. The reason that Chinese exports compete so effectively against other countries products is that they don’t have to worry as much about trifling things like fair practice and human rights of their workers. The justification for outsourcing essentially is “We can’t compete with other companies that brutally exploit workers, so all we can do is move to another country so we can brutally exploit OUR workers as well”. Maybe it’s effective, but it’s also deeply immoral.
The only real solutions I see to this are strict standards for companies that import and favoritism for our own companies. Give benefits to those who buy from our own people, and forbid the import of products from certain companies, not just on the basis of product quality, but also on how they treat workers. If China is forced by the world to give western treatment to their workers, their monopoly would be much harder to hold. We’d be doing those workers a favor in the meantime too.
[...] The Monitor report, which takes four pages on its website, details how extensive China’s near monopoly on Vitamin C is: (more…) [...]
Finally, an awareness is creeping in about the down side of global markets. It’s been too much the case, that the market place has been embraced wiht near religious fervor, and to raise doubts has been seen as heretical.
Globalization is here. The tiger can not be put back in its cage. It’s also true, that over the course of a very long time, it may be possible that the kinks can be worked out, so that this huge process can work more smoothly and equitably.
We are not there yet, however, and the kinks need much more serious attention than they’re getting.
Adding human rights and quality control clauses to trade agreements with China is only a tiny tiny step.
These clauses have no effective enforcement mechanism. Laws and regulations in China are all written by the central government, but the central government can’t oversee compliance to any great degree. At the local, provincial level, where regulations have to be implemented, officials and all arms of the government are notoriously corrupt and notoriously difficult for the central government to oversee. The rare and spectacular hanging of an official is only a small dent, ans its symbolic value is too prone to be overwhelmed by the power of greed.
Meanwhile, US inspectors have no access and can do what they can only after the fact.
Since markets are inherently based on competitive greed, It’s to be expected that China would do what it can to tip the scalws in its own favor. It’s high time we stopped being naive and paid more attention to the many problems that need solving.
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Yeah, Joe, I complained about this myself as part of my ongoing coverage of the pet food recall. What puzzles me is why is China the leading producer? This doesn’t seem to be the sort of thing that China could be expected to lead in since their competitive advantage as the least-cost supplier of labor wouldn’t seem to be particularly important in producing a substance like ascorbic acid.
Part of the answer, I think, may be that the domestic producers were using the old Reichstein method for industrial production of Vitamin C while the Chinese producers were using the newer two-step fermentation method developed by the Chinese 40 years ago. If that’s the case why didn’t the domestic producers convert to the new method?
I wonder if too many U. S. companies are unwilling to change and do the capital investment required to compete in selling low margin commodities. They’re looking for the big score, trying to win the lottery. That would seem to be particularly true as large, publicly-held companies gobble up smaller privately-held companies. Just speculation on my part but it rings true to me.
Following up on domajot’s comment above, I think that several things are necessary. First, we need country-of-origin labelling laws that go down to the ingredient level. Second, we need Sarbanes-Oxley type measures to ensure the veracity of the labels. It shouldn’t be enough for CEO’s of mega-billion dollar companies to say “I didn’t know where the products my company was selling were from”.
But I think that the key, bottom-line, end of the day issue is that domestic companies need to do much, much more due diligence when dealing with overseas vendors. There is no international civil code. Consumer recourse is solely to the domestic suppliers not to the overseas companies (unless they want to try to prosecute their claims in, for example, China’s courts).
Dave Schuler-
It isn’t only China that is causing the trouble, of course, You are quite right about US companies going for the easy moncy, instead of investing in newer technologies. The trouble is that it isn’t only CEOs who drive this phenomenon. It’s the investors and consumers. We don’t care about long term effects as long as we can pay a penny less for our vitamin C while seening the value of our investments rise by the same amount.
When the question of labeling down to the ingredient level was raised, a sea of company spikesmen and lobbyists descended on Washington and cable news stations to argue against it.
Somehow, the public needs to be reeducated to see further than the ends of their noses. They could then have different expectations from the providers of good, and by extension, from the government.
I agree broadly with your point, domajot. However, I’m inclined to believe that a relative handful of managers and money managers are actually a lot more influential in the decisions than the broad mass of the American people. Most Americans own stocks but they do so in the form of mutual funds, 401K’s, etc., most of which are, basically, a closed book to them.
Dave and Dom,
I haven’t had a chance to read the article, but based on the snippet above from the article….
“pollution limits on chemical and pharmaceutical companies”
I’m wondering if production move there based on the US having more stringent pollution limits?
Just a guess, but maybe the cost to meet our pollution limits made it so much more expensive that it was easier to offshore it.
Just to be clear, I don’t think lowering our standards of allowed pollution just so we can have some produced here is a good idea. I’m just spitballing as to why China is producing 80% of it.
Jim B-
I have no idea whatsoever what part pollution regulations or labor laws or quality control laws specifivally play into this situation with vitamisn C,
My concern is more general, i.e. that we should pay more attention to how we play in the global market. The first step is to acknowledge when the impact is negative. The second is to look for ways to prevent the US from sliding downwars
to the lowest denominator.
It will take a lot of analysis and a lot of public awareness to pressure the powers that be.
This is not good news, we shouldn' talk about monopolies for cures and medicines. How come China has near monopoly for Vitamin C? Is this vitamin so difficult to produce? In this case we should expect discount vitamins from China?