Tate & Lyle confirms UK citric acid closure

The closure, which the company has blamed on intense competition from Chinese imports and oversupply in the world market, will affect approximately 100 jobs.

Citric acid is the most widely used acidulant and preservative in the world, and is used in numerous food and drink applications.

It is produced by mould fermentation of sugar solutions and by extraction from lemon juice, lime juice and pineapple canning residue.

The citric acid business at Selby - which excludes the production of astaxanthin - returned sales of £26m and an operating loss of £2m.

In addition to pricing pressures, Tate & Lyle said that production of citric acid at Selby has been adversely affected by changes to the EU sugar regime (which became effective from 1 July 2006), which increased substrate costs.

Tate & Lyle said that it would continue to serve customers from existing inventory and operations in the US, Brazil and Colombia.

Chinese producers have had an enormous effect on the global ingredients market.

The Chinese have managed to undercut, out-produce and quickly replicate quality levels across numerous manufacturing domains, and also enjoy an advantage in lower labour costs.

Western firms, under pressure from retailers, have increasingly switched to new, cheaper supplies in order to cut raw material costs.

Chinese suppliers tend to sell their citric acid at the lowest price possible, regardless of cost calculations, in order to bring in hard currency.

This has made it extremely hard for European suppliers to compete.

In 2004 for example, DSM was forced to lay off staff at its Citrique Belge unit, as part of a restructuring move designed to enhance the competitiveness of its citric acid production activities.

"I would like to extend my thanks to colleagues at Selby for their dedication and hard work over the years and in particular over the last month," said Stanley Musesengwa, Chief Operating Officer, Tate & Lyle said.

"This decision was not taken lightly.

However, continuing pricing pressures and oversupply in the world market meant our UK citric acid business could no longer operate viably."

Tate & Lyle said that it would provide local job shop facilities staffed by independent professional counsellors.