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November 21, 2011

 

China Grain Corporation considers joint venture with Henan Grain Group

 

 

China Grain Corporation is in talks with Henan Grain Group on establishing a joint venture oil company.

 

An official of Henan Grain Group confirmed the news but said both have yet to finalise a joint venture agreement.

 

Henan Grain Group, founded in March 2011, is the largest grain and oil group in Henan province. It has RMB3.68 billion (US$0.58 billion) total assets, RMB960 million (US$151 million) net assets, 1.8 million tonnes of grain and oil storage capacity, and 1.2 million-tonne annual processing capacity of grain and oil.

 

In May 2011, China Grain Corporation formed a strategic cooperation agreement with Chinatex Corporation Limited, a major player in textile business and grain and oil business, pursuant to which both will set up a soy processing plant in Rizhao City, Shandong province with a 1.2 million-tonne annual capacity. The plant started production recently. Chinatex Corporation Limited now has 22,000-tonne daily production capacity and owns 11% share in the domestic edible oil processing sector.

 

China Grain Reserves Corporation this October also entered into an agreement with Beijing Grain Group to establish an oil processing plant that can process 1.5 million tonnes of soy and refine 450,000 tonnes of soyoil per year as well as a 350,000 tonne reserve in Tianjin. Total investment will be RMB1.5 billion (US$0.24 billion). Both will probably cooperate in rice and wheat processing in the future, said Wang Guofeng, general manager of Beijing Grain Group.

 

China Grain Corporation's fast expansion in the oil sector via the alliance with other large state-owned enterprises has stirred arguments whether it conflicts with the National Development and Reform Commission (NDRC)'s control over oil processing capacities. There are excess grain and oil processing capacities in China and the utilisation rate of production capacities in rice and oil industries is just 40%-50%, according to China National Association of Grain Sector.

 

China Grain Corporation plans to have over six million-tonne oil processing capacity and over two million-tonne oil refining capacity by 2012 and seize 10%-12% market share at home.

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