DSM to close vitamin C plant in US
costs at its plant in Dalry, Scotland, as part of a series of
measures to ease pressure on its vitamin business, reports
Dominique Patton.
The bulk ascorbic acid plant at Belvidere in New Jersey is expected to close in the third quarter, leading to around 150 job cuts. DSM has already axed 200 jobs at its Dalry plant in Scotland.
The announcement has been expected for some time and reflects China's increasing domination of global vitamin production.
DSM shares the global market for vitamin C, the largest of the vitamins in volume terms to be produced by the group, with BASF and around four other Chinese companies.
One of the biggest Chinese producers, North China Pharmaceutical Co (NCPC), claims that around 80 per cent of its 20,000 tons of vitamin C currently goes to the European market.
DSM has charged higher prices for long-term contracts with key accounts, based on advantages in terms of services and quality. But development of the market suggests that it may not be able to sustain these prices in the long-term.
Chinese vitamin C was selling at €2.80 per kg this week, almost its lowest point. BASF highlighted the negative impact of falling vitamin C prices on its fine chemicals unit in last year's financial report.
Both BASF and DSM are entering into joint ventures with Chinese producers as a means of competing more evenly. DSM recently bought a small stake in NCPC. They are also looking at new production processes in a bid to reduce their costs in the future.
DSM said yesterday that it is developing a 'one step direct fermentation process' for vitamin C. The vitamin is currently produced through fermentation followed by a chemical conversion step. However it is not sure whether the new process will work on an industrial scale.
There is also continuing pressure from high raw material prices. The key raw materials for the initial fermentation process are glucose derivatives of crops like wheat or corn, both of which have surged in price in recent months owing to pressure on stocks.
DSM said yesterday that upgrades at the Dalry plant would help allow for increased raw material flexibility. But another key cost for vitamin C production, energy, is also at record prices.
DSM Nutritional Products, along with a wave of cost cuts, has however had a strong benefit on the group as a whole, and the firm emphasised in a statement that it remained committed to the vitamins business.
"With these steps we are showing our commitment as well as our dedication to improving our competitiveness," said Feike Sijbesma, CEO of DSM Nutritional Products.
The company will continue to produce its other products at the Belvidere site, such as formulations for other vitamins and arachidonic acid for baby formula milk.
