The deal was agreed in November 2017 but remained subject to standard conditions.
The asset in question is Sinarmas Natural Resources Foodstuff Technology (Tianjin) Co., Ltd, which includes oilseeds crushing and refining facilities in the Lingang Economic Area within Tianjin’s Binghai New Area district. Sinarmas’s parent company is commodities giant, Golden Agri-Resources (GAR).
LDC said the newly acquired complex spans a land area of some 300,000 m2, while the processing facility has a daily soybean crushing capacity of 4,000 tons for the production of soybean meal and crude soybean oil, and a daily refining capacity of 1,200 tons for the production of refined edible vegetable oil. There are also bottling, filling and packaging lines, as well as storage facilities.
Beyond the new processing plant in Tianjin, LDC operates three other similar facilities in in Hebei, Jiangsu and Guangdong provinces, supplying soybean meal to major and local feed mill groups that produce animal feed, as well as edible oils for food companies.
Crushing margins
Soybean crushing margins in China have remained buoyant since early August, generating demand for more soy imports despite delays in getting import certificates, according to a Reuters report.
Chinese imports of soybeans jumped to the third-highest volume on record in December 2017, according to data from China’s General Administration of Customs. Imports by the world’s top soy buyer that month came in at 9.55m tons, up 10% from November 2017 and up 6% from December 2016, the data showed.
Investing in China
In terms of how easy is it to invest in China today, James Zhou, head of the north Asia region at LDC, told FeedNavigator:
“We believe this is an opportune time to invest in China as the Chinese government has openly communicated their intentions to expedite the opening up of the economy, welcoming investments across many industries, including the agricultural processing sector. Our latest Tianjin acquisition is a positive response to this development.”
Asked whether the recent consolidation trend in the Chinese feed sector and increasing scale of feed manufacturers in that market appeal to LDC, Zhou said:
“It is encouraging to witness the growth and modernization of the Chinese feed sector that contributes to a conducive business environment for agricultural processors like ourselves to supply the market with higher protein soybean meal that helps meet growing domestic consumer demand for animal protein.”
Background to crushing developments in China
In 1999, large-scale foreign investments started to enter China’s crushing industry, showed a recent Solidaridad report.
In the 2000s, noted the publication, foreign multinational companies controlled 70% of China’s crushing industry. In 2007, a new law was enacted to limit foreign companies’ operations and control of the crushing industry, in order to support the domestic crushing industry. Today, Chinese firms control 60% of the Chinese crushing industry, as per data in that report.
The Solidaridad document also illustrates the growth trajectory in China’s soy crushing industry, which has expanded with the rapid development of China’s feed industry.
The crushing industry has an annual increase of 13-15% each year. The total annual processing volume increased from 10m tons per year at 64,000 tons per day to 90m tons per year at 300,000 tons per day. By 2012, the total volume per year reached 139m tons. In 2014, the total volume reached 145m tons. While the annual crushing capacity in China continues to grow, facilities tend to run at half the capacity, found the publication.
Companies within the top 15 leading companies in the crushing industry in China, as per the report, include Wilmar Kerry Ltd, Cofco, the Jiusan Group, Bohai, Chinatex, Bunge, Cargill, Sinograin, NobleAgri Group, and the Hopefull Group.