Outlook sours for smaller plants

17 March 2003 00:00  [Source: ICB]

Rationalisation looks certain for the European citric acid industry, which is in turmoil. Prices have hit all-time lows and the industry is losing money, said a major supplier. 'Smaller plants that do not have economies of scale will not survive.'

Low Chinese prices have undermined European numbers which ranged from E0.68-1.00/ kg in 2002 and pr

ices have been forced down this year by excess availability and competition for business. Players say prices are now at rock bottom and are not sustainable, with breakeven the best hope for this year.

Demand has slowed over the past two years from traditional growth of 3-5%/year. Chinese suppliers have been exporting greater volumes to Europe and taking market share from domestic producers. 'European producers will have to accept there is competition from China and get into a cost competitive situation,' according to one leading producer. 'Cost control is a major issue, Chinese suppliers will not go away.'

The closure of Aktiva's plant in the Czech Republic could well signal the beginning of a wave of consolidation. The 20 000 tonne/year plant is now idle although it is unclear whether the stoppage is permanent.

In addition, ADM's restructuring plan has prompted a strike in Ringaskiddy, Ireland. Production was halted on 7 March, following the failure of one of the three unions that represent workers at the facility to accept the company's latest proposal. ADM said the 'restructuring is necessary in a very difficult business environment'.

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