A2S2 Market Update (August 2013)

This market update has been informed by information gathered from artemisinin extractors but, due to the end of A2S2's financing by UNITAID, field visits have not been possible since the beginning of June 2013 so we have not had the possibility to check on the field plantations or cross check information through ‘face to face’ meetings.

The market is still facing serious uncertainties: demand is lower than last year, due to a lack of medium - long term ACT forecasts and fears concerning the consequences of the end of AMFm. Production of artemisinin is also facing competition from semi-synthetic production which reportedly has the capacity in 2014 to cover between 30-50% of possible total artemisinin needs (depending on the final ACT forecasts). All these uncertainties are presently pushing down the selling prices of natural artemisinin to below production cost (see A2S2's monthly Indian artemisinin import data). Therefore, to be able to meet these low prices being offered by some Chinese companies (270 - 300 $/kg), extractors have to obtain lower prices for the dried leaves, which will effect the revenues of the farmers and could impact on their willingness to plant next year (2014).

Natural Artemisinin

China

The harvest this year has been postponed to as late as possible so as to push prices down i.e. pay less to the farmers (see above). Weather conditions have been very variable, with drought in some regions (Chongqing and Yunnan area for example) and floods in others (Sichuan area especially), impacting the quantity of biomass and the artemisinin content in the leaves. Average content for cultivated leaves could be slightly above 0.6% compared to 0.7% last year (-10 to 15%) and the biomass per hectare will also decline. Harvesting wild leaves mainly depends on demand and, at the moment, the level of orders are low, and therefore it is expected that the collection of wild leaves will also be low. In order to reach the low selling prices presently on the market, extractors are trying to obtain dry leaves at maximum 1,100 $/T which farmers, and collectors are reluctant to follow. If extractors do not receive all expected quantities, Chinese production could be negatively impacted.

Vietnam

Harvesting of the Artemisia crop is finished and leaves have been stored, but content is still low (0.5%) and extractors are delaying processing as orders are very low. Actual production in Vietnam is expected to be about half the volume in 2012 i.e. around 12MT for 2013.

East Africa and Madagascar

With the difficult market conditions, production for 2013 is expected to be less than previously predicted i.e. around 3 - 5MT for East Africa and 12 - 14MT in Madagascar. These extractors, without long term contacts, are having difficulty meeting the low prices now being offered and also due to the lack of orders.

Global Natural Artemisinin Supply Estimate

Our artemisinin production estimate for 2013, based on the available biomass and content, is for a worldwide production of 120 – 140 MT natural artemisinin, however, there are big uncertainties due to the present lack of orders, low prices being offered and the potential impact of, up to, an additional 60MT of semi-synthetic artemisinin. We are also very cautious as farmers and collectors are not willing to accept the low prices proposed for the leaves, prices corresponding to the present market for artemisinin. This could strongly diminish production in China.

If there is greater clarity in available donor funds it will be possible to present more accurate long term ACT forecasts, thereby enabling API/ACT and artemisinin manufacturers (both natural and SSA) to better plan their production schedules, resulting in a more stable artemisinin market, both in terms of supply and pricing.

Semi-synthetic Artemisinin (SSA)

At the Artemisinin Conference in Nairobi, January 2013, Sanofi/PATH Drug Development Programme, announced that they would be producing up to 35MT of SSA for their use and for customer trials in 2013, and that they have the capacity to produce up to 60MT of SSA in 2014. The price will be around $400/kg, depending on quantity. It has subsequently been reported that Sanofi has now achieved WHO prequalification for its SSA.

Whilst there have been reports and rumours, that other companies and institutions are aiming to develop SSA, to date A2S2 has no confirmation that this is the case, apart from the work being undertaken by Artemiflow/Max Plank in Germany. It is understood that they are progressing with their research into developing technology which will add value to the present natural product extraction, through the utilisation of dihydroartemisinic acid (DHAA) remaining in the waste matter, following artemisinin extraction.

The 2012/2013 production of natural artemisinin exceeded market demand, with the result that, at the present time, stocks are high and prices low. With no confirmed ACT forecasts for 2104 and beyond, it is therefore essential that future production of both natural and semi-synthetic artemisinin is coordinated, to ensure long term, sustainable, production, at a price which is fair to both the producers and buyers.