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COMPETITION IN the xanthan gum arena has intensified in the past year, with several major food ingredient players taking steps to add the product to their texturizing portfolio. Two players entered the market through joint ventures in China, which could signal a fundamental shift in where xanthan capacity is added in the future. Though the playing field is becoming more crowded, most companies expect the market-which is growing at a healthy clip-to support the anticipated capacity additions without seeing a major dip in prices.
The xanthan market is currently fairly snug, and demand is growing at around 5 percent per year, helping to keep prices relatively steady. Several producers announced price increases on xanthan in 2003, with Rhodia upping prices for Rhodigel food grade xanthan gum by 10 percent in July and CP Kelco increasing its food-grade xanthan products by up to 10 percent in August. However, currency effects balanced much of the gains, and prices remain in the $3.25 to $3.60 range seen by the market in late 2002.
The healthy market has attracted several companies looking to broaden their texturizing portfolios, including Cargill Inc., the first major player to forge into xanthan through China. The company established a joint venture with Zibo, Shandong Province, PRCbased Shandong Huanghelong Group, which had an existing facility in China, in late 2002. The venture, called Zibo Cargill Huanghelong Bioengineering Company Ltd. (ZCHB), was part of an effort to further integrate Cargill's texturizing business and build upon the starch activities acquired through the purchase of Cerestar.
In late 2003, ZCHB announced plans to increase capacity and capabilities at the Zibo facility. By mid-2004, the company expects to nearly triple capacity to over 5,000 metric tons, add a new analytical laboratory and wastewater treatment plant and implement process modifications to enhance operating efficiencies at the plant. "China provides a...