Increasing competition among Chinese crushing companies is impacting the sector's profitability and leaving approximately half of potential production capacity idle due to reduced margins, according to representatives from two major Chinese crushing companies at a forum in Dalian, as reported by AgriCensus.
“The soybean crushing sector in China faces intense competition, with the annual crushing capacity reaching between 190 million and 200 million tons,” said Li Feng, assistant director of a business unit at leading Chinese crushing company, Yihai Kerry, during the forum held on November 2, as stated in the report from the same date.
However, the volume actually crushed was only 95 million tons, approximately half of this capacity, he added.
At the same time, he explained that increased competition between crushing companies has driven up crushing prices. soy imported, while reducing the prices of finished products such as oil and soybean meal, resulting in negative crush margins for the sector.
Challenges and opportunities for Chinese soybean companies
Crushing capacity in China is also highly concentrated among a few players, with the top 10 crushers accounting for around 80% of the total crushing volume, according to Feng.
“Our crushing industry needs to adopt self-discipline and avoid excessively fierce competition,” he highlighted.
Luo Yonggen, chairman of another major Chinese soybean crushing company, Jiusan Group, echoed Feng's comments in a separate speech during the forum.
Chinese crushing companies are expanding their capacity. This includes state-owned, private and foreign companies. In September, daily crushing capacity reached 482,000 tons. Yonggen said volumes are expected to increase to 500,000 tonnes next year.
“However, with capacity expansion, the utilization rate has remained below 60% for the past three years. This means that around 40% of this capacity was wasted,” he explained.
Waiting for an expansion in the crush, competition will increase. Overwhelmers will have a hard time making a profit locally, says Yonggen, predicting challenges in the sector.
Soybean harvests in South America were abundant. This caused a reduction in soybean meal prices. This scenario could result in an increase in use in feed products, as noted.
However, he added that reducing excess capacity in China's feed sector would limit demand growth for soybean meal.
Source: Oils & Fats International
