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Navigating Turbulent Waters

Abstract: The EU market is facing tough challenges, especially for processors in the starch industry. Raw materials and energy costs are increasing. The European grains market is experiencing a lot of ups and downs due to geopolitics, weather, and funds activity. Energy prices are remaining high compared to what they used to be. Despite these challenges, the demand for starch and derivatives is growing, even though, with some sectors recovering faster than others. However, processors are still struggling to optimize their operations and stay competitive while dealing with high variable costs. 

The cost to produce starch and derivatives is rising in Europe

Starch derivative processors’ cost pressure remains at high historical level as European grains market is experiencing significant volatility, driven by geopolitical tensions, weather concerns, and funds activity. The EU grains market registered a sharp increase in recent weeks as uncertainty over Russian wheat production and grain flows to Europe is growing. The Russian wheat crop has been damaged by the temperature variations which is a worrying trend for the industry. Also, the bombing of Ukrainian ports is increasing concerns over grains flows to Europe. 

Additionally, the European energy market remains under pressure. Recent price increase is attributed to uncertainties over gas flows to Europe after Ukraine warned of a build-up of Russian forces in the north from where Russian natural gas is piped into Ukraine to European customers, low LNG (Liquid Natural Gas) imports amid unstable US production, and cool temperatures.

Rising costs of raw materials and energy are emerging as significant issues, which is making it difficult for processors to compete in the market.   

Better market dynamics for starch derivatives in Europe  

Starch and starch derivatives are mainly used in the food industry in a wide range of applications (e.g., confectionery, beverages, dairy products, baked goods) for their sweetening, anti-crystallizing, texturizing and nutritional properties. It is also largely used in the paper and board industry for its binding properties, from increasing the strength of paper, used as surface sizing but also used in the manufacture of corrugated paperboard, paper bags or boxes. 

After a year of weak consumption of starch derivatives in Europe – impacted by the energy crisis and economic slowdown, Q1 2024 market demand is up in all sectors - growing by 5% overall compared to last year to date. 

Industrial sectors are recovering faster than the food industry. The better economics with the Eurozone expected to see a slight recovery as inflation moderates should help enhance further the usage of starch derivatives over H2 2024.

Optimizing starch slurry to remain competitive

While the market is expected to gradually improve as inflation eases, the high costs and volatility in raw materials and energy prices continue to pose significant challenges for processors. They must find the right balance in their starch slurry process to cover high variable costs to remain competitive, potentially limiting availability for some products in Europe. 

Key takeaways - Staying Competitive and Thriving 

Despite the challenges faced by the starch industry in the EU market, there are reasons for optimism. Demand for starch and derivatives is growing, particularly in industrial sectors, and the market is expected to gradually improve with a projected recovery in the Eurozone.  

However, the industry must navigate the high costs and volatility of raw materials and energy prices. Processors must optimize their operations to remain competitive, potentially limiting availability for some products in Europe.  

While the road ahead may be difficult, with careful management and adaptation, the starch industry can continue to thrive and meet the growing demand for its products. 


A May 2024 Update on the Starch industry EU Market by Roquette Market Analysts