IMR puts hydrocolloid price increases in context

By Anthony Fletcher

- Last updated on GMT

Related tags Food Edible thickening agents Guar gum

Price increase announcements in the hydrocolloid sector do not
necessarily reflect market conditions, according to IMR

For example, there have been three carrageenan price increases announced by the world's largest producers since early 2000.

IMR, a leading hydrocolloid market analyst, says that if implemented, these increases should have resulted in a compounded 22.5 per cent rise in carrageenan prices from early 2000 until end 2005.

In fact, prices in IMR's Quarterly Review of Food Hydrocolloids for refined carrageenan have declined by 15.1 per cent over that period.

In the case of xanthan gum, the world's largest producer has announced increases that would compound to 30 per cent over the last five years. But the Quarterly Review of Food Hydrocolloids indicates a decline in xanthan gum market prices of more than 30 per cent.

There has been a spate of price increases in recent weeks. Lactic acid giant Galactic is the latest ingredients firm to announced substantial price increases on the back of rocketing energy costs, following the likes of Purac, Jungbunzlauer and Lonza.

Other large hydrocolloid suppliers including Hercules, FMC, National Starch, CP Kelco and ISP have also announced ingredient price increases.

And there are indications that some of these increases announced towards the end of 2005 will be implemented by 2006. Increasing energy, raw material and transportation costs can no longer be absorbed by producers.

Margins, says IMR, have been reduced to a bare minimum especially at the larger accounts.

Indeed, it is clear that hydrocolloids, used extensively by the food industry to texturise and stabilise food products from dressings to ice cream, continue to face spiralling costs for raw materials.

Locust bean has seen massive price rises on the back of a bad crop and supply chain problems. Guar gum has gone up, and carrageenan prices, extracted from seaweed, have been impacted by a strong pull on global carrageenan stocks, themselves influenced by an increase in demand from China's booming processed food industry.

Industries from steel to food continue to be hit by soaring energy costs. Prices for crude oil, both a key raw material and energy supplier for the food industry, recently topped a record $70 a barrel.

Global oil consumption is expected to increase by 1.75 million barrels a day next year to total 85.2m barrels a day, the International Energy Agency forecast last month.

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