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Commodities

Trade war and swine fever take toll on beauty industry

Collagen prices surge as supply shrinks

The price of tilapia skin has been on the rise since end-2017.    © Reuters

TOKYO -- The U.S.-China trade war and an unstoppable swine fever have claimed an unexpected victim - the health and beauty industry, as collagen prices surge.

"The price of collagen peptide has more than doubled from the end of 2017," said a spokesperson of a health food producer. In Japan, the price of collagen peptides has jumped to 3,000 yen ($27.70) per kilogram compared with 2,000 yen a year ago.

Widely used in skin care products, collagen is believed to soften skin, slow down the aging process and help erase wrinkles. Because of such claims, the health food industry has developed collagen peptides which are consumed as dietary supplements that are believed to improve the appearance and alleviate joint pain. Gelatin, too, is derived from collagen, which can be extracted from animal and fish skin, although tilapia and pigs are the main sources of collagen peptides.

According to Irish research company Fact.MR, China is the largest tilapia producer, providing nearly 28% of the global supply in 2017. It is also the biggest tilapia exporter to the U.S., providing 86% of American imports which totaled $464 million last year.

But the demand for collagen is not confined to the U.S. The global price hike is underpinned by growing demand in Europe and in Asia, especially China, Malaysia, Indonesia and Thailand. According to Transparency Market Research, the global collagen market will expand at a compound annual growth rate of 9.4% to reach $9.37 billion by 2023.

Given the strong demand, Chinese tilapia farmers have also started to produce collagen peptides themselves, hoping to capture a slice of this market but in turn, fueling a shortage of tilapia skin and boosting prices of the raw material.

"We are putting every effort to keep supplying collagen peptide to our customers," said Hitoshi Nakayama, representative director of Rousselot Japan, a Japanese subsidiary of Rousselot, the world's biggest collagen and gelatin producer headquartered in the Netherlands. "But we cannot do it without paying more," he added.

Against this tight supply, the industry was dealt another blow by the trade confrontation between the U.S. and China. The U.S. decision to slap a 25% tariff on Chinese imports, including tilapia fillets, has only pushed prices higher. "If U.S. demand falls, farmers will cut fillet production. In that case, there might be lower skin and scale supply," said a Nitta Gelatin staff.

The other source of collagen peptide, pigs, is also dwindling. China has been afflicted with African swine fever and the disease has spread to Hong Kong, where thousands of pigs have been slaughtered to prevent further contagion.

"We brace for a further price surge," said a staff at Nippi, a key Japanese collagen and gelatin producer. The company's suppliers in Europe and North America recently said they would increase the prices of materials derived from pig skin.

Nippi said it has little choice but to source for other raw material such as catfish skin. The company expects its plant in Shizuoka prefecture to make collagen peptides to begin full operation in the summer. The new plant can increase current production capacity by three times.

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