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Costs cause new rise in DSM vitamin, premix, citric acid prices

By Jess Halliday , 12-Oct-2006

DSM Nutritional Products is increasing prices of its food and pharma-grade vitamins, premixes and citric acid, as it redoubles efforts to cover rising raw material, energy and logistics costs.

The worldwide 10 per cent price increase, announced last week, coincides with similar measures taken by other vitamin manufacturers - most notably BASF which has increased prices of its food grade vitamin A and B2 by 12 and 20 per cent respectively.

Gareth Barker, director of global human nutrition and health marketing, told NutraIngredients.com that the raw materials at play are crude oil, which has seen dramatic increase in the past five years, sugar, and caustic soda used in waste water treatment.

 

Methanol prices have also been steadily increasing and most recently leapt up to €400/MT (Methanex price) on October 1. Methanol was cited by BASF as a reason for its vitamin A price increases last week.

 

Barker said that these materials, as well as electricity and gas, "are all directly or indirectly affecting production costs and logistics".

 

This is the second price increase for DSM's vitamins this year. Vitamin and carotenoid prices went up as of April 1, with the scale of the increase that time communicated directly to customers.

 

This time DSM has not made a specific comment on carotenoids, and would not go into details as to the reasons.

 

As part of its Q2 results communication in July, DSM said that will be a delay before further cost increases experienced by the group as a whole can reasonably be passed on to customers, particularly in "a number of end markets where an increased resistance to further price increases is noticeable".

 

However Barker said that this was a general comment not directed specifically at vitamins, and that there are "pockets within DSM where the cost pressure is too much".

 

In addition to the food and pharma grade vitamins, DSM has also recently announced a price increase for its feed grade vitamin E, caused by "exactly the same" factors.

 

So far, the initial reaction from customers is said to have been relatively sympathetic; they recognise that rising costs are affecting other ingredients suppliers, not only DSM.

 

In recent years European and US vitamin makers have been squeezed on price by their Chinese counterparts. This pressure was a factor in DSM closing its manufacturing plant in Belvidere in New Jersey last May, leaving it with reduced yet more efficient capacity in Dalry, Scotland.

 

Since BASF announced the closure of its plant in Denmark in December, Dalry became the last at the last remaining European vitamin C plant.

 

When it comes to the energy and raw materials however, this is not expected to compound the Chinese problem. Chinese suppliers are also experiencing the same cost-related issues, said Barker, and they may be under even more pressure since their yields are lower.

 

The latest increases are regarded by DSM as a long-term measure - although Barker said that there may be exceptions, with "one or two products going in the opposite direction".

 

Unlike BASF, which last week announced that it is combining its animal and human nutrition units to save on sales and marketing expenses, DSM is not considering any other measures to tackle costs at the present time.

 

It has already undergone a restructuring process over the last two years.

 

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