November 14, 2012

China may see cessation of oil processing production

Wang Xiaoyu, deputy secretary-general of Heilongjiang Soybean Association, China, expects about 90% of the Chinese province's edible oil processing companies to stop production with the end of the third quarter.

Currently, the loss of making one tonne of edible oil out of soy imported from the US will amount to CNY400 (US$64.15) or so, forecast the deputy secretary-general. Notably, Heilongjiang, a northeastern Chinese province, has been known for soy planting and edible oil yielding.

The sharp markup of soy imported from the US has done harm to China's soy-based edible oil industry, and will block the sound development of the industry, pointed out Ma Wenfeng, an analyst with Beijing Orient Agribusiness Consultant Ltd. (CnAgri), a subsidiary of Xinhua Finance.

Industry experts ascribed the sharp increase in US-produced soy prices to lack of information. China has imported a large amount of soy from the US, only based on the output expectations of the USDA. The adjustment in its expectations has led to some mistakes in Chinese importers' decision.

In spite of the harm, China's edible oil industry has undergone a rapid growth these days. Months ago, Shandong Luhua Group Co., Ltd., one of China's largest edible oil producers, put Dongguan Luhua Edible Oil Co., Ltd. (transliterated) into operation.

This is the only production base set up by the edible oil giant in the Pearl River delta, and the daily output of four production lines is designed to reach 260 tonness.

Currently, the production lines mainly produce sunflower seed oil, nut oil, corn oil, and soy blend oil. The production base will gradually extend its reach to packaging of peanut oil, colza oil and other edible oils as well as production of oil packing materials (PET bottles).

Dongguan Luhua is expected to be capable of annually packing and processing 60,000 tonnes of superfine fragrant peanut oil and blend oil.

COFCO Ltd., a leading food manufacturer in China, has made a stronger presence in the industry. With its small-packaged Fulinmen-branded edible oil series, the company lifted its market share to 15% in 2012, rising by three percentage points from the previous year.

In 2008 when the variety of oil brand was single, COFCO held only a 10% share of China's small-packaged edible oil market. In recent years, however, the company has successively launched 15 kinds of products, which include DHA algal oil and corn oil.