February 23, 2011

More Chinese dairy makers to quit amid tougher rules

About 20-25% of the China's dairy makers will quit the market this year as the government moved to neaten its dairy product market by ordering ban on those who fail to get new production licenses before March 1, 2011.

The notice was jointly released by the General Administration of Quality, Supervision and Quarantine (AQSIQ), the Ministry of Industry and Information Technology (MIIT) and the National Development and Reform Commission (NDRC), targeting Chinese companies involving in the production of dairy products and infant formula milk powder.

According to a report by the Industry and Information Technology Department of Shaanxi province on February 14, the province had a total of 78 dairy makers as at the end of 2010, with a combined processing capacity of fresh milk of 8,200 tonnes per day. After the check-up, the figure will drop to 54, leading to 30.77% of the producers facing shutdown. These producers had outdated production capacity of 1,850 tonnes per day and accounted for 22.56% of the total production.

Shaanxi began washing out the outdated production capacity from 2008 and by the end of January 2011, it had shut down 41 dairy makers, accounting for 43.15% of the total with outdated production capacity of 2,900 tonnes per day.

In addition, Sichuan, Guangdong, Ningxia Autonomous Region, Fujian and Yunnan released similar reports in succession. Up to 50% of the dairy makers in Fujian will quit the market, most are those with daily production capacity not more than 20 tonnes, sources said.

The majority who quit are small dairy makers, thus the market share they give up will be 10-20% percent in total, a dairy expert said, adding that the quit will deliver little impact to the whole industry as China's dairy sector has booked a 50-60% excessive production capacity.