3/15/13

Vanillin squeezed by cost pressures-12/06/2006-CMR

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Vanillin squeezed by cost pressures 12 June 2006 00:00 [Source: IC B Americas] THE MARKET for vanillin, one of the most sought-after ingredients in the flavors and fragrance industry, is continuously being pounded by high energy and raw material costs as well as tight supply and demand fundamentals. The synthetic vanillin market saw total industry-wide price increases of between 23% and 25% from early 2005 up to present. Rhodia Organics, which covers Rhodias flavor and fragrance (F&F) operations, announced a 6% global increase for vanillin and ethyl vanillin prices effective June 1. The company also implemented a price increase of 5% earlier this year. Rhodia has worked proactively to improve productivity, reduce manufacturing and operating costs over the past years through a severe restructuring program. However, these efforts are offset by a relentless pressure coming from high energy costs feeding into raw materials, production and transportation costs, says Sebastien Meric, global business director for Rhodia F&F. He adds that the company is also proceeding with the recent price increase to keep pace with the strong demand. Borregaard, the lone global producer of lignin-based vanillin, raised prices last year by an average of 1015%. Lignin vanillin uses spruce wood as the starting material. Borregaard says it plans to increase prices of vanillin and ethyl vanillin by 48% in the third quarter, due to the current high energy costs and tight market situation. Despite a higher price for lignin-based compared to the guaicol based vanillin, we experience a healthy demand as the market is starting to value the distinct aroma profile of lignin vanillin and the fact that the starting material is natural, says Thomas Grys, director of Borregaard Synthesis Aroma. Two players exited the market last year, and with a growing demand, the market is very tight at the moment, Grys adds. The global market for vanillin and ethyl vanillin is placed in the range of 12,000 to 16,000 tonnes per year, with 2,000 tonnes coming from lignin-based vanillin. Production of pure natural vanillin is estimated around 40 tonnes per year. Global demand for synthetic vanillin is reportedly increasing 3% to 4% per year. Growth demand in C hina, however, is in excess of 10% per year estimated at 2,200 tonnes, says Rhodias Meric. C hina is a big vanillin exporter but local consumption has jumped year over year, he adds. There are between 50 and 100 million new C hinese consumers for vanillin each year, especially in applications such as in food and personal care formulated with vanilla flavors. C hina accounts for 40 percent of the global vanillin supply although several C hinese producers have already exited the vanillin market, driven by skyrocketing benzene cost and growing environmental and health concern associated with the manufacture of vanillin that uses the o-nitrochlorobenzene (ONC B) route. Rhodia, through its subsidiary, Ruohai Fine C hemicals, is the only manufacturer in C hina that uses the catechol route to obtain guaicol, a key intermediate for vanillin production. The catechol route is said to be more economical in terms of raw materials use, and produces less toxic waste. CAPACITY EXPANSIONS AHEAD? Rhodias recent announcement to build a diphenols plant in Zhenjiang, C hina, could eventually lead to a new vanillin plant in the country later on, says Meric. The plant, with an annual capacity of 12,000 tonnes, will produce catechol and hydroquinone, and is expected to start in early 2007. Most of the catechol will be used for Rhodias internal consumption, especially in vanillin manufacture. Some will be sold. C hina is starting to migrate from the ONC B route to catechol due to environmental and process-associated health and safety concerns. Some ethylvanillin producers have already switched but none so far as vanillin goes, notes Meric. It is an option for us to sell some of the catechol but we expect to use more of it for our own production. Borregaard says it is also looking at capacity investments. We expect the market to continue to be tight and we see no new capacity coming up in 2006 or 2007, says Grys. We have a continuous focus on debottlenecking our plants to increase capacity. We are also investigating on other ways to expand our capacity and business further, he adds. Both companies expect Asian vanillin demand to significantly increase, while growth will remain moderate in Europe and the US. Further price pressures are also expected to continue for the rest of the year, driven by rising energy and raw material costs, and volatile currency exchange in C hina. Aside from rising costs, there is clearly a tightness in the market and any new price increase before the end of the year cannot be ruled out because of the volatility in the market, notes Meric. I will not be surprised if prices will increase another 5% to 10% by the end of the year, comments Grys. C urrent synthetic vanillin price was reportedly quoted around $14 to $15 per kilo for large contracts. A TOUGH, COMPETITIVE MARKET Rising prices are driving new product replacements for vanillin. Symrise says it has developed Vanillin Replacer Flavor and Flavor Plus, as alternatives to vanillin and ethyl vanillin, with a comparable sensorial profile and low cost in use. Our alternative flavors do not share vanillin or ethyl vanillin disadvantages like solubility problems, discoloring of the finished product, price volatility or sourcing bottlenecks, says Symrise. Borregaard launched late last year its EuroVanillin Plus that combines maltodextrin and lignin vanillin. Initial sales were estimated at 100 tonnes and is projected to significantly increase in the next few years. We have created a product with as strong a flavor as vanillin from guaicol but having significantly improved viscosity, says Kurt Ove von Husby, marketing manager at Borregaard. In view of the vanilla beans highly volatile market, Rhodia, meanwhile, has concentrated its efforts on its Rhovanil Natural, a natural vanillin obtained by biofermentation of rice bran. By: Doris de Guzman +1 713 525 2653

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Vanillin squeezed by cost pressures-12/06/2006-CMR

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