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Posted by on Jul 22, 2007 in Health | 9 comments

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.