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Jungbunzlauer raises prices for citric acid

By Lindsey Partos , 10-Oct-2005

Energy costs and European supply issues herald price increases for the popular beverage ingredient citric acid, with major manufacturer Jungbunzlauer announcing a price hike for citric acid and trisodium citrate.

With immediate effect, the Swiss-based firm said prices for these products would increase by a minimum of 10 per cent.

Citric acid is one of the most widely used food acids by today's food and beverage industry, with over 70 per cent of the world's 1.4 million ton market propelled by this sector.

Largely produced by mould fermentation of sugar solutions, citric acid production is energy intensive. But steep energy costs, particularly related to oil that recently topped a record $70 a barrel although has since fallen, have multiplied costs for the citric acid producers.

"The strongest increase stems from energy and energy related costs. They also affect our suppliers of raw materials, packaging and chemicals and additionally have an important impact on our freight rates," says Jungbunzlauer.

The move follows hot on the heels of DSM that last month announced a 15 per cent price increase for all its citric acid products.

In Europe, Jungbunzlauer, DSM and Tate & Lyle are the principle players, with Jungbunzlauer claiming its Austrian citric acid plant is, by capacity, the biggest single production unit in the world.

Up until last month, US agri-firm ADM was also a major supplier in Europe, but the company has since closed its Irish citric acid plant, leaving a 60,000 ton hole in European supplies.

But the closure has opened up new sales opportunities for the remaining European producers, such as Jungbunzlauer, that have the capacity to produce more.

In addition, the ADM exit heralds new openings for the highly competitive Chinese makers, currently enjoying a considerable slice of the market.

Lower costs and a strong euro mean that Chinese suppliers, with their stripped down margins, have squeezed down prices for citric acid in Europe. Cheap, the product costs about $1 to $1.3 a kilo.

The Chinese now dominate about 40 per cent of the global €1.53 billion market.

But the pressure is on, with the DSM and Jungbunzlauer price rises a possible harbinger of further rises.

Prices will go up for the Chinese citric acid producers as costs of implementing new regulations - previously non existent - start to bite, says an industry source.

Squeezed down so hard, the Chinese do not have much margin left, they conclude.

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