September 9, 2009

China's top planning body warned on Tuesday (Sep 8) that the country's soy crushing capacity was far larger than needed, the latest suggestion that Beijing could push for consolidation in the sector.

Besides excessive expansion in steel and cement sectors, overcapacity in the shipbuilding, aluminium and soy crushing industries were also worrying, Chen Bin, a department director with the National Development and Reform Commission (NDRC), was cited as telling a conference.

According to Chen, the government would further curb such expansion next and push forward restructuring of those industries.

China has already restricted expansion by Wilmar International, which has the largest soy crushing capacity in the country. However, state-owned COFCO Co Ltd was still expanding as it planned to establish a soy crushing plant with a projected annual capacity of 1.2 million tonnes in the southern region of Guangxi.

Meanwhile, industry officials said about half of China's 80 million tonnes of annual soy crushing capacity were not in operation last year. They added that the situation is unlikely to improve this year.

In 2007, only 44 percent of capacity was in operation and many of the closures were plants with daily capacity below 1,000 tonnes.

China is encouraging a restructuring of the soy industry to form some big companies that would have better logistic and port facilities, said Liu Xiaonan, an official in NDRC, at a soy conference last month. He added that the government is encouraging soy plants to sign long-term contracts to ensure supplies as China relies heavily on imports.