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As the world population grows the demand for food and feed ingredients, detergents and cosmetics is also rising, which causes organic acids like citric acid, monosodium glutamate or lysine to ride a boom. Until the beginning of the 20th century, citric acid was produced via crystallization of citrus fruit juice, which gave the product its name. Nowadays, citric acid as a commodity chemical is produced via fermentation of sugars.

Several feedstocks can serve as fermentation substrates and their use depends on the local availability. Maize starch is mainly used in the US and China, while sugarcane molasses dominates in the Brazilian and Indian market. European producers rely mainly on sugarbeet molasses. Second generation feedstocks have not found their way into citric acid production thus far, although there are projects to establish cellulosic feedstocks in the citric acid industry.

Under Tanzania’s ten-year Sisal Crop Development Plan (2011-2020), the Mlingano Agriculture Research Institute is set to develop a protocol for the production of citric acid and ethanol from sisal. Thus far though, there is only one plant that uses agricultural waste and biomass as fermentation substrates, Arkenol’s 40,000 tonne facility in Sacramento, California, which has been operational since 1999. Apart from that all producers employ first generation, food-based feedstocks.

Asia against the rest of the world

Global citric acid production capacity reached almost 1.8 mln tonnes in 2010, F.O. Licht data show. This compares with close to 1.5 mln in 2005. The leading continent is Asia with the largest share by far among all global regions over the entire period and exceeding the 50% mark in any year. Unless an unexpected event occurs that shakes up the entire industry, Asia can be expected to remain capacity leader in citric acid in the future. Although the ranking of continents has not changed since 2005, the individual shares have evolved over time. The Asian share is the only one that has grown between 2005 and 2010, while the shares of the remaining regions became smaller. However, Europe has gained some ground over time compared to the Americas on the back of stronger growth rates.

World: Shares in Citric Acid Capacity (in %)
Region 2010 2009 2008 2007 2006 2005
Europe 19.20 18.48 18.26 18.76 19.13 20.26
America 24.14 25.79 25.48 26.18 26.86 27.46
Africa 0.67 0.72 0.71 0.73 0.75 0.79
Asia 55.98 55.02 55.55 54.34 53.27 51.49
Source: F.O. Licht

Asian capacity has grown by 6.2% on average in the period under review, which compares with global growth of 3.9%. With this, Asia is the only region that has outpaced global growth and is therefore the major driver of the increase in global citric acid capacity. Growth in Europe averaged 2.2%, while capacity in the Americas expanded by a mere 0.7% per year between 2005 and 2010. The only plant on the African continent, Citro Misr Co.’s facility in Cario, Egypt, continued to operate at 12,000 tonnes per year, i.e. African capacity stagnated at a very low level.

Building capacity for exports

Fermentation chemicals in general and organic acids in particular have a long history in China and continue to have a strong presence. A main driver of the capacity expansion in citric acid seems to be increasing demand for exports. While Chinese capacity has expanded by 4.8% on average per year between 2006 and 2010, exports have grown more rapidly, by 10.5%. That allows drawing the conclusion that Chinese producers are looking to capitalize on the rising need for food ingredients around the globe, which raises the demand for and the price of citric acid.

Export data show that countries around the globe have significantly increased their imports from China between 2006 and 2010. Among these countries are major European importers like Germany, the Netherlands or Turkey, but also countries in other parts of the world such as Brazil, Argentina, India or Thailand, the latter of which has almost sextupled its imports from China in the period under review.

Given strong demand, Chinese export prices rose between 2009 and mid-2011. Since then, quotations have eased somewhat, largely on the back of receding demand from major importer India and other destinations.

By contrast, domestic consumption does not seem to play a role in this respect. In the absence of reliable data on domestic consumption of citric acid, we still can draw conclusions about the development of this variable by utilizing data on capacity and exports. Assuming a capacity utilization rate of 95% in 2006, falling to 90% in 2010 and no changes in stocks, domestic consumption ranges between 100,000 and 250,000 tonnes in the 2006 to 2010 period, where the lower values are recorded towards the end of the period under review. The fact that domestic consumption at most stagnates, if not declines, shows that any capacity build-up is the result of strong export demand and not related to domestic consumption.

Consolidation around the world, but not in China – yet

The pure number of citric acid plants in Europe, America, Africa and Asia excluding China combined exceeds the number of Chinese plants only slightly, according to F.O. Licht data. Today, China is host to 21 larger scale citric acid plants, most of them between 20,000 and 60,000 tonnes. Only three of all Chinese plants have a capacity of 100,000 tonnes or more, among them the largest plant in the world: the COFCO Biochemical (Anhui) Co. Ltd. facility in Bengbu, Anhui, which has the potential to produce 220,000 tonnes per year.

Europe and America host eight plants each, while one and seven plants are located in Africa and the rest of Asia, respectively. This has not always been the case, because the citric acid industries in the Americas, Europe and India in particular have undergone a lengthy phase of consolidation that began in the mid-1990s in which they experienced several divestments and plant closures.

World: Citric Acid Plant Closures until 2010
Continent Country Company City Region Latest capacity (tonnes) Closed in Feedstock
Europe France Jungbunzlauer Marckolsheim Alsace 40,000 2001 Wheat, maize
Europe Ireland ADM Ringaskiddy Cork 40,000 2005 Molasses
Europe Spain Ebro Cortes Valencia 5,000 1991 Beet molasses
Europe United Kingdom Tate & Lyle Selby Yorkshire 25,000 2007 Molasses
Europe Sum 110,000
America Mexico Tate & Lyle Cuernavaca Morelos 22,000 2003 Molasses
America United States Haarman & Reimer (Bayer) Elkhardt Indiana 40,000 1998 Maize starch
America Sum 62,000
Asia China DSM n/a Wuxi 40,000 2009 Maize starch
Asia India Citric India Mumbai Maharashtra 3,000 1997 Cane molasses
Asia India Citrugia Biochemicals Surat Gujarat 6,300 2003 Cane molasses
Asia India Gujarat State Fertiliser & Chemicals Ltd. Baroda Gujarat 12,000 2004 Cane molasses
Asia Sum 61,300
World Sum 233,300
Source: Licht Interactive Data – Plants & Projects

It is worth noting that the companies that have closed facilities across Europe and America are without exception large diversified corporations, active throughout the value chain. One reason cited for the closures was that high costs had pressured margins to an extent that citric acid production was simply not profitable anymore. The majority of the closed plants employed beet or cane molasses for its citric acid production. Furthermore, it is worth pointing out that increased shipments from China to the EU and the Americas at prices considerably below domestic quotations have bruised the industries there. Anti-dumping duties on imports from China are currently in place in the US and the EU to shield the local industry from cheaper imports. Petitioners for anti-dumping duties on Chinese imports included Jungbunzlauer and DSM in Europe and ADM, Cargill and Tate & Lyle in the US.

The only plant that shut its doors in China is DSM’s 40,000 tonne facility in Wuxi, although this closure may constitute a special case, because it might have had nothing to do with the economics of the plant, feestock availability or prices. The Wuxi government asked DSM to shut the plant, because the land was needed for alternative purposes. However, had DSM considered the business very profitable, one might ask why the company did not open another plant at a different location, but instead agreed to the closure and received compensation from local authorities. It seems citric acid production in China was not sufficiently profitable for DSM after all. In India, the industry has changed dramatically and the number of plants has reduced from four to solely one after 2004: Bilt Chemicals Ltd.’s 25,000 tonne plant in the state of Gujarat.

Outlook

Although citric acid capacity in China is expected to expand further, it seems the pace of expansion is leveling off. One more facility is announced in the Shanxi province, which will bring an additional 60,000 tonnes. The owner of the project is Shanxi Huarong Citric Acid Chemicals Co., which does not operate any citric acid capacity so far. A sign for diminishing growth are reports of low capacity utilization at existing plants such as Jiangsu Gadot Noubei Biochemicals facility, which together with high feedstock prices caused its parent, Gadot Biochemicals Industries, to post a net loss of $18 mln.

Another indicator in this respect is that Chinese exports in the first eight months of 2011 were lower year-on-year at about 481,300 tonnes, down from just over 486,600 tonnes in Jan/Aug 2010. High shipments in the first four months of the year were more than offset during the May/Jun period when exports were at multiple year lows. If this trend continues, an accelerated consolidation of the Chinese citric acid industry can be expected.

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