Asia’s Largest Corn Refiner Shuttered After China Revises Corn Price Policy
This month China reduced the price at which the state buys domestic corn reserves, but kept the price well above international market rates. Artificially high domestic prices have caused an explosion in corn reserves while also causing an increase in cheaper imports and decimated margins for companies such as processors and feed suppliers.
Chinese media reported that because of the situation within the sector, Global Bio-Chem Technology, the world’s third largest corn refiner and the largest refiner in all of Asia, has suspended all operations after the company announced that loss-creating production lines have been shut down.
In its annual report issued last week, Hong Kong-listed Global Bio-Chem announced it has stopped producing Lysine, an ingredient in hog and poultry feeds, noting in its report, “Price of corn kernel, which constituted a significant component of the group’s cost of sales, stayed at a high level, irrespective to market condition.”
The refiner also found that the production of corn sweeteners and starches have become unprofitable, while it has also had to stop refining corn into a chemical feedstock, because low oil prices made the process uncompetitive.
The Chinese refining industry accounts for approximately 80% of the global lysine supply and about one third of its consumption, however, high raw material costs have cut into exports, while domestic demand has fallen because of poor margins within the pork sector and avian flu in the poultry sector.