Xanthan gum export prices are currently as low as $3.11 to $5.06 a kilo (depending on grade) according to CyberColloids, which has published a new market report on the versatile hydrocolloid. In the past, they have been $8 to $9 a kilo.
As well as being used in foods like dairy products, sauces, beverages and ready meals, lower grade xanthan gum is also used as a lubricant in oil drilling, Ross Campbell of CyberColloids explained to Foodnavigator.com. But since demand from this area has plummeted, any supplier for which this was a major market now has a lot of spare capacity.
In 2009, the oil industry remained the largest industry using xanthan gum, accounting for 40,300 metric tonnes, compared to 37,090. But although overall volume growth has been great since 2004 – from 70,000 to 96,000 – the 2009 figure is down 9.3 per cent on 2008.
Campbell said that the lower prices are opening up some new uses of the gum in the food and personal care arenas, however, where it was previously too expensive. He cited data from Euromonitor International which shows keen development of low-juice beverages in Asia and Latin America, where xanthan is used to give texture to beverages that otherwise contain just water, flavour and colourings.
“They can create the mouthfeel they couldn’t afford before,” he said. Another new use that was previously not possible on price grounds is in toothpaste.
The hub of action in the xanthan market is taking place in China, where two companies, Deosen and Fufeng, have emerged as strong leaders in the last 10 years and are battling it out to be the Chinese number 1. In 2004, xanthan exports from China were 12,500 tonnes and Fufeng was not yet on the scene. Last year, exports were up to 46,000 tonnes.
While the report expects Deosen and Fufeng to continue expanding, and says they are “well placed for the increasing demand from their own region,” the quality of their product does need to improve.
China and the rest of Asia are requiring increasing amounts of xanthan gum for use in processed and packaged foods that are enjoying new popularity. But Deosen has gained traction in the US market too, with a competent sales and technical presence there.
However the drive towards expanding capacity in China does need to come to a halt at some stage, CyberColloids says, so that prices can recover. “It is difficult [from a Western perspective] to understand how production and sales costs can be covered by the current prices.”
Certainly for smaller players a big question mark hangs over them, in terms of how sustainable they can be in the long term. While there has already been a good deal of consolidation in the hydrocolloids market, Campbell said in the next two or three years we may see some acquisition of Chinese players by Western firms. But beyond that, in five to 10 years time, the tables could turn and Chinese firms could be buying their Western counterparts.
For now, though, some of the Western majors have been reining back their activities. For example, in 2007 CPKelco closed its xanthan gum plant in Knowsley, UK.
Campbell says the focus needs to be on differentiation – and this is a strategy that Danisco has adopted. Last year it launched a new range of application-specific xanthan gums for use in dairy, beverage, bakery and miscellaneous uses.
ADM and Cargill, however, could be losing interest. They are said to have “lost traction” with their investments in xanthan, and unless the market starts to turn about they may well switch their fermentation capacity to other uses.
As for CP Kelco, CyberColloids is expecting that it will stay static in the next couple of years, but will focus any expansion on value-added personal care varieties of xanthan gum and other biopolymers. Neither ADM nor Cargill are known to be developing speciality products at the moment.
CyberColloids predicts that volumes will continue to grow; for food the rate is expected to be 15 per cent – and this is regarded as conservative due to the economic slow down. As consumer confidence increases, or as oil and gas prices go up, growth is expected to be given a push too.
More information on CyberColloids’ new market report is available from http://www.cybercolloids.net