The Challenges of Securing Starch Derivatives Supply in a Tight EU Market
Published September 30, 2021
In a strong market demand environment, the European starch derivatives industry is facing an unprecedentedly high variable cost situation: raw materials, energy, and freight costs are hitting record price levels. This leads to a challenge for the starch derivatives industry to remain competitive and for customers to secure supply.
Starch and its derivatives are mainly produced from wheat and maize in Europe. Those two raw materials have skyrocketed to the highest price level since 2013. A tight market situation due to shortage of corn and poor quality of spring wheat has lowered the availability of milling grade used by the starch industry. On top of this challenging, high raw material cost environment, starch and derivative producers are facing record-breaking high energy costs with European gas and power prices hitting all-time highs. Natural gas storage is depleted following an exceptionally cold spring. EU gas supply is extremely tight for the winter to come, leading to price competition with Asia to attract flexible liquefied natural gas and balance winter consumption. This unprecedented energy crisis striking Europe is forcing some factories to shut down activities. Additionally, other variable costs like freight, packaging, or chemicals are also surging and significantly impacting starch derivative producers.
