Plant closure underway for CP Kelco
having completed the first phase of its closure after cost
pressures compromised its viability forcing it to cease production.
Raw material and production costs have been spiralling across the industry since last year, and xanthan gum has proved no exception to this, despite holding off the effects at first. The causes for the increased costs include competition for grains from biofuels, competition from emerging markets, poor harvests affecting stock, and the soaring cost of oil, which has recently reached $120 per barrel. This is coupled with cheaper Chinese production placing competitive pressures on sale prices. The hydrocolloid supplier therefore announced last September that it planned to shut its UK production facility, located near Liverpool in Knowsley, leaving the company with three remaining xanthan gum plants - two in the US and one in China. Stepping up xanthan gum production at CP Kelco's China plant, where production costs are lower, should therefore help in combating costs. The company said the three facilities would be able to cover the extra production and that supply and prices to its customers in the region previously served by the plant - Europe, the Middle East and Africa - will not be affected. The company claims a 40 per cent share of the global market for xanthan gum. Xanthan gum is a hydrocolloid used in the food industry for its thickening and stabilising properties. Applications include salad dressings, sauces, ice cream, syrups and powdered juice drinks. Plans for the plant The plant was developed by Tate & Lyle in 1978, and acquired by CP Kelco in 1981, when it was upgraded to carry out the company's proprietary batch fermentation and recovery technology. It has more than 730m3 of fermentation capacity, but the company has not decided what to do next with the plant. It is currently considering a range of options, including selling it or putting it to alternative uses. James Tuan, general manager for Kelco biospecialties group, said: "Knowsley is well-equipped for the production of high quality food and consumer fermentation products. This asset has generated a great deal of interest and we are currently engaged in a process to select the best opportunity." Soaring production costs At the time of the announcement of the UK plant's closure, the company's biogums product director Ed Gallagher said: "The plant just wasn't viable anymore." A number of hydrocolloid firms have had to introduce price increases across their product range to combat the higher prices, including CP Kelco, FMC Biopolymer and Jungbunzlauer. At the end of last year, CP Kelco said price increases would enter the double-digit range and would affect pectin, carrageenan, carboxymethyl cellulose, cellulose gum, gellan gum, welan gum as well as xanthan gum. No one from the company was available for comment on the current market situation for xanthan gum, or its global price.
