Investment in synthetic nicotine industry needs to be considered from the market demand side and supply side
Demand side of Synthetic Nicotine, three driving forces:
1) The rapidly growing global demand for e-cigarettes drives the growth of demand for Synthetic Nicotine (gradually replacing traditional tobacco and gradually increasing penetration);
2) The nicotine concentration in tobacco oil increases (from 1-2% to 3% and then to 5-6%), and smokers become more addicted, driving the sales of tobacco oil;
3) Disposable e-cigarettes evaded PMTA supervision in the United States, and their cigarette oil packaging gradually increased from about 1ml to 5-10ml or more, driving the sales of cigarette oil
Under the above three driving forces, at present, the global consumption of Synthetic Nicotine is about 800-900 tons a year, including 500 tons + under the relatively standardized statistical caliber, and the rest is driven by unofficial channels (such as disposable e-cigarettes mentioned above). At the same time, the industry is growing rapidly, and CAGR is estimated to be no less than 30% in the past few years.
1) Localization of tobacco oil origin in China: in the first two and three generations of electronic cigarettes, smokers are allowed to change their own tobacco oil. Therefore, cigarette sets are mainly produced in China, and tobacco oil is mainly produced locally by smokers. After 2018, the fourth generation of electronic cigarettes (that is, our common electronic cigarettes) Smokers are not allowed to change their own tobacco oil. The tobacco oil is directly packaged. In addition, the quality of tobacco oil produced in China is also good. Therefore, more tobacco oil production has been handed over to Chinese enterprises, a number of Chinese tobacco oil production enterprises have been cultivated, and a large number of global tobacco oil production needs have been undertaken;
2) Supply side reform caused by policy supervision: after March 22, the regulatory measures of the General Administration of tobacco of China (web link) explicitly prohibited the flow of waste tobacco into the e-cigarette market in violation of the treatment method. 90% of the nicotine used in the e-cigarette industry was waste tobacco in Yunnan (used to produce chemical fertilizer according to regulations) , nicotine extracted after illegal treatment. At present, China Tobacco prohibits illegal treatment of waste tobacco leaves, resulting in tight supply of nicotine and soaring price (at present, the price has increased to about 5 million a ton)
3) The breakthrough in synthetic nicotine technology has brought about a stable supply system of Synthetic Nicotine: chemical Synthetic Nicotine can be divided into chemical resolution method and pure chemical synthesis method. The former provides racemic or partial l-nicotine, which is expensive and has no market significance, such as foreign NGL, domestic Henuo, etc.
Industry summary: the demand side is experiencing growth and the supply side is undergoing supply side reform. Only by understanding the supply and demand background of the industry can we understand that investing in Synthetic Nicotine is not a speculation or event driven, but the beginning of a big wave of the industry.
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