September 17, 2008


Fallout from China milk contamination case widens



The fallout from China's formula milk contamination case continues to widen as authorities revealed that Sanlu was not the only source producing contaminated milk.


Tests conducted over the past week showed that 69 out of the 491 batches sent for testing were contaminated, according to the General Administration of Quality Supervision, Inspection and Quarantine ( AQSIQ).  


This means up to one in five milk firms tested failed the AQSIQ tests. Among those affected were other giants of China's milk industry such as Yili - China's largest maker of dairy products, Mengniu and Shanghai Bright Dairy. All the tainted batches have been recalled and will be destroyed, according to the AQSIQ.


The AQSIQ said exported products and those supplied to the recently-ended Olympic Games ( by Yili) were not contaminated however.


Milk sold by Sanlu was found to be contaminated with melamine, which caused close to a thousand babies to develop kidney stones and killed at least two babies in China. The figure was discovered after an initial group of 14 babies were discovered with kidney stones, a rare condition in babies.  


The AQSIQ did not reveal what the contaminants in milk produced by the other companies were but said all liquid milk produced after Sep 14 would be safe for consumption.  The agency has ordered a thorough investigation into all tainted firms and officers were sent to 1,500 dairies in the country to conduct inspections.
Meanwhile, Tian Wenhua, the board chairwoman and general manager of China dairy giant Sanlu Group, was fired from her posts in the wake of the tainted baby formula milk powder scandal.
Four officials in Hebei's Shijiazhuang, where Sanlu is based, were also fired for loose supervision of milk suppliers, including the vice mayor in charge of agricultural production, the city's animal husbandry administration chief , the city's Food and Drug Adminstration Bureau director and the city's Quality and Technical Inspection Bureau chief. 

Shares of  Yili Industrial Group fell to 6 percent to close at RMB 13.43, the lowest in more than two years in Shanghai trading.


An ice cream product made by Yili may be tainted by melamine, Hong Kong media said after the market closed. A Hong Kong supermarket chain, said it will stop selling Yili ice cream products after a regulator said it found the same chemical in a sample.


The series of incidents could affect consumer confidence in local infant formula products as well as other dairy products before any definitive answers are found,' Morgan Stanley's Angela Moh and Lillian Lou said in a note.


Authorities have arrested four milk dealers in Hebei who sold contaminated milk to Sanlu and 22 others were detained.


Melamine when used in dairy milk misleads testers into believing the protein content has been boosted. Market watchers say the Chinese dairy industry's reliance on outside sources for its milk  highlights its vulnerability to contamination.   


Sanlu has sealed off 2,176 tonnes of contaminated milk powder and recalled 8,210 tonnes from the market. There are still 700 tonnes to be recalled. All the contaminated formula was produced before Aug. 6 of this year.


Supermarkets in some provinces, including foreign ones in China such as Wal-Mart and Carrefour started to pull Sanlu milk powder off shelves.


Melamine in wheat gluten made in China also caused the deaths of dozens of pets when it was mixed in with pet food last year. The incident sparked off the largest pet food recall in US history and led to closer scrutiny of other China imports which uncovered other lapses.

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