Energy costs drive National Starch price hike

By Anthony Fletcher

- Last updated on GMT

Related tags Cost

National Starch's plan to increase the cost of its European
starches by up to ten per cent reflects growing industry concern
over rocketing energy prices.

The company said that the increase, which will affect its European food, encapsulation, beverage and texturising starches, will be effective as of 14 November 2005.

The announcement underlines growing unease about the industry's ability to absorb rising associated costs. Invariably though it is the end user that is saddled with this burden.

"On the basis of general energy cost increases in Europe, it is fair to say that customers will not be too surprised by this increase,"​ National Starch Food Innovation European business director Steve Kardos told

"Like everyone, they will be facing other price increases as a result of higher energy costs. I think this will be generally accepted in the market place."

Prices for crude oil, both a key raw material and energy supplier for the food industry, recently topped a record $70 a barrel. The knock-on effect has been felt in transportation, refining, production and storage.

The consequent effect on the ingredients industry has been noticeable. Purac raised the prices of its range of lactic acids for the second time in six months in October, while Swiss-based Jungbunzlauer recently raised the price of its citric acid products.

Swiss chemicals group Lonza also announced that it would increase the prices of its niacin and niacinamide by between 10 12 per cent as of January 2006, while in the US, Solae has pushed up soy lecithin prices.

ISP has done the same for its alginate range, while FMC has lifted gum prices - all on the back of spiralling energy costs.

While energy costs are the main driving factor behind National Starch's recent price increase announcement, it is clear that high cereal prices have also taken their toll. "There has been drought in some areas, and we've had to accommodate that,"​ said Kardos.

Indeed according to the UN's Food and Agriculture Organisation, global output is expected to reach 1 984 million tonnes, a 3.4 per cent fall on 2004's record output. In terms of production and use, and heralding price squeezes, a cereal shortfall of 31 million tonnes is forecast.

But it is fear over ever-increasing energy prices that continues to dominate industry concerns. While the International Energy Agency forecast earlier this month that global oil consumption is expected to increase by 1.75 million barrels a day next year to total 85.2m barrels a day, the long-term effects of current energy pricing remains unclear.

"This price increase shows that we are trying to catch up at the moment, and if there are further energy cost increases in the future, then we might well have to come back to the market,"​ said Kardos.

"No one is talking of significant reductions in oil costs as far as I can see, so we'll just have to keep our options open."

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