Demand Outstrips Supply, Us Citric Acid Prices Soar

After a protracted period of chaos, conditions in the United States appear to be beginning to improve. In view of a more favourable scenario, market participants in the citric acid industry are expected to experience a favourable market situation during the whole of August. The recent fall in Citric Acid prices in the US domestic market is due to several factors, including increased supply from China, lower domestic demand and the ongoing conflict between Russia and Ukraine. All of these elements have had an impact on the US domestic market for raw materials, including citric acid, which experienced a decline in the last quarter of 2023. As a result, market participants will see their Arbitrage window improve in the coming months considering the improving end-use demand. Inflationary pressure which propelled the cost of raw materials and energy to surge, making it more expensive to produce Citric acid is also likely to impact the production cost in the upcoming months as the fed’s inflation target is still way above and beyond. The US economy is even so experiencing high levels of inflation, which also contributes to the increase in the price of Citric acid.

However, beginning in the third quarter of 2023, Citric Acid prices started to pick up steam in the domestic market of the US. Since the commencement of 2023, the CFR (Cost and Freight) prices of Citric Acid had been rising. The cost of shipping goods by air, sea, and truck has been rising steadily in recent months, due to a number of factors including fuel prices, port congestion, and labor shortages. Also, the ports of Los Angeles and Long Beach, which handle the majority of US imports from Asia, are still experiencing significant congestion. This is due to a number of factors, including the war in Ukraine, and the ongoing trade war between the United States and China. The logistics industry is still facing a labor shortage, as there are not enough workers to fill all the open positions. The primary causes of the increase in Citric Acid prices across the country in April 2023 were the restocking of local manufacturers' and suppliers' inventories as well as the improved demand for its new stock from end-user industries like food and beverage (F&B), and nutraceuticals.

Meanwhile, in China, typhoon Doksuri made landfall in southern China on Tuesday, August 1, 2023, bringing strong winds and heavy rain. The storm has caused widespread damage in southern China. In Zhanjiang, roofs were blown off buildings, and trees were uprooted. Power outages have been reported in several cities. This will also impact the Chinese market. Also, China is the world's leading producer of citric acid, but it has been exporting less of the product in recent months. This is due to several factors, including rising production costs and increased demand in China. The cost of lemons, which are a major raw material for citric acid production, has increased in China due to drought conditions. In addition, the Chinese government has imposed export taxes on citric acid to protect domestic producers.

Several other factors, including growing demand, supply constraints, and rising energy costs also provide positive cost support to Citric acid. Citric acid is a versatile compound with a wide range of applications, including food and beverage, pharmaceutical, and industrial. Inflation is also a factor that is contributing to the rising price of citric acid. The demand for Citric acid is expected to increase due to its increasing use in these and other industries. The cost of producing Citric acid has been rising in recent months on the back of the rising cost of energy, raw materials, and labor. The cost of energy has been a major driver of price increases. As a result of these factors, the price of Citric acid is expected to increase by 4-5% in August 2023. This increase is likely to have a ripple effect throughout the food industry, as food manufacturers pass on the higher costs to consumers.