September 24, 2007

 

China to halt approvals for corn processing projects for 3 years

 

 

China would freeze approvals for industrial corn processing for three years and suspend approved projects which have not yet begun construction, the National Development and Reform Commission (NDRC) said.

 

The ban on 'deep processing' of corn was announced amid rising concerns in China that the country may not be able to secure enough food supplies for its 1.3 billion population if more corn supplies are diverted to make ethanol.

 

The commission said it would not 'in principle' approve new corn deep-processing projects until 2010. The NDRC will also closely review the expansion plans of existing deep-processing projects which use corn.

 

Huge profits have lured investors to launch new projects, with an annual output of more than 10 million tonnes of fuel ethanol planned, almost ten times the current 1.02 million tonnes.

 

China has forbidden foreign companies to invest in bio-ethanol production projects, and they are not allowed to acquire or invest in domestic bio-ethanol producers.

 

China currently has four producers using corn to manufacture ethanol.

 

Corn processing firms should have relatively strong economic strength and risk resistance capacity, Friday's Shanghai Securities News quoted guiding principles released by the National Development and Reform Commission (NDRC).

 

Net assets of corn processors should at least double the capital of their projects and total assets should be at least 2.5 times the project investments, said the principles.

 

Companies should also have a minimum credit rating of "AA" with provincial financial institutions.

 

The NDRC said the development of deep-processing industries was excessively rapid in some areas.

 

Corn usage for biofuels have been growing an average of 14 percent for the past five years, triple the 4.2 percent growth in output. 

 

Demand would continue to outpace output in the next five years, with the former growing 14.3 percent from 2006-2010, compared to output growth of 3.5 percent during the same period. Both output and demand are expected to reach 150 million tonnes by 2010.

 

Over the next three years, corn consumption by the deep-processing sector will be restricted to 26 percent of China's total corn consumption, the NDRC said.

 

The NDRC said that it would adjust corn export and import policies, and review an export rebate adjustment on corn products.

 

The commission also proposed a reduction in corn exports and urged the import of more corn to ensure supply.