Lactic Acid

Lactic Acid Global Market Outlook:

Global LACTIC ACID market (2023-2027)

Global market size: $3.27 Billion

CAGR: 9.0 percent

• China is one of the largest producer of lactic acid, while Thailand, along with Belgium and China are the largest exporters with the export share of more than 60 percent

Lactic Acid: Supply Analysis

• The US holds a major production share, due to the presence of leading manufacturers, like Purac and Cargill

• The Netherlands serves as the production house for Corbion/Purac and Henan Jindan, who are the key suppliers in the lactic acid market

• Availability of corn starch feedstock is expected to ease over the next few months, owing to harvest supplies and import shipments. Meanwhile, a steep hike in production costs, coupled with logistic concerns from China, could hinder the overall market growth

• China has approved a list of Brazilian traders for its corn shipments, a step ahead in the Brazil-China corn deal. For Brazil, this would diversify its export destinations and improve sales. According to reports, more traders could be approved in the upcoming weeks. This would eventually improve feedstock supply for corn-based downstream products

Lactic Acid Price & Cost Analysis

• Projected demand elevation from the food and beverage industry and the increasing demand for poly lactic acid, which have a wide range of applications, could escalate the US lactic acid price

• Incoming harvest supplies of corn in China and imports from the US, Brazil, and Myanmar could decrease competition for feedstock with the feed industry

• As Lactic acid is used as a feedstock for numerous industries, more vertically integrated production facilities may emerge in the next few years which will ultimately determine the lactic acid market availability

• Corn is used as a feedstock for almost 80 percent of the lactic acid produced globally and the rest 20 percent is from sugar and other starch products. More production capacity expansions are anticipated in the APAC region until 2023

• Lactic acid prices are trending high owing to cost inflation which is almost 35% higher than a year ago. No supply issues are being reported, however demands from cosmetics sector remain strong. China's corn output estimates for 2022 has been increased by 1.7% to reach 277.2 MMT as per official. This is mainly considering the improved weather conditions although acreage and yield sanked slightly

• Fluctuating raw material prices, including corn, sugar, and tapioca starch, coupled with high energy costs and nitrogen fertilizers, could lead to an overall uptrend in prices in 2023. However, incoming harvest supplies of corn in China and imports from the US and Brazil could improve feedstock availability and ease prices in the near term

Porter's Analysis on Lactic Acid

Supplier Power

• Corn and other starch sources are the primary feedstock for lactic acid production

• Corn prices are determined based on domestic supply–demand and global scenario

• Prices are indexed to large trading entities, such as CBOT and Euronext

Barriers to New Entrants

• Lactic acid can be produced from many sources, such as corn, corn starch, wheat, barley, etc., thereby providing an edge for the new manufacturers

• The lactic acid market is already overshadowed by the significant suppliers, which may inhibit the new entrants

Intensity of Rivalry

• Presence of few large suppliers for natural lactic acid increases the intensity of rivalry among suppliers

• Lower switching cost results in competitive pricing in the industry

Threat of Substitutes

• There is a high threat of substitute, owing to the presence of economical alternatives, such as acetic and citric acid in the market

• Profitability of the citric acid manufacturers is formidable compared to lactic acid

Buyer Power

• The natural lactic acid market is fairly consolidated with large suppliers, such as PURAC, BASF, Cargill dominating the market

• With the presence of minimum number of suppliers for natural lactic acid, suppliers hold an edge during negotiation