 |
After buying corn for years to support farmers, Beijing must find
a way to work off a stockpile so big it could feed China's 1.4 billion people
for more than a year. Image credit: machineto.com
|
China's plan to get rid
of its massive corn stockpile by using it as raw material for its fledgling
biodegradeable plastics industry could be a game changer for Changchun Shengda
Biomaterial and other private factories in China's Corn Belt.
Reuters
report continues:
After
buying corn for years to support farmers, Beijing must find a way to work off a
stockpile so big it could feed China's 1.4 billion people for more than a year.
The
government reckons the cure for its longstanding headache could be in promoting
the nation's polylactide (PLA) sector, which turns corn starch and cassava into
biodegradable plastic products like bags and plates.
China's
state grain bureau announced the strategy in a five-year policy document at the
end of December, which also included a push to increase ethanol output and use
of the grain as livestock feed.
The
council didn't give details of how it would implement the plan, which has the
potential to boost corn prices at a time of a global glut.
Still,
the policy marks a significant shift for the government and its food-security
fixation, which has long made it reluctant to promote the non-food use of
grains in a country that endured three years of famine in 1958-61. It also
illustrates how the corn mountain - and a market soaked in bumper U.S. crops -
is forcing policymakers into new territory.
If
successful, a nationwide industry would help whittle down the corn inventory,
built up after a decade of government buying from farmers to support incomes
and ensure food for the growing, urban population.
It
could in the long term upend the niche global market for biodegradeable
plastics, challenging established PLA players like NatureWorks LLC, a joint
venture between Cargill and PTT Global Chemical, which sells into China. China
could export PLA products too.
Total
global output of PLA products is expected to rise to 800,000 tonnes by 2020,
from 200,000 tonnes in 2012, according to China Research & Intelligence in
Shanghai. Half of that would be in Asia.
Some
experts, however, have questioned whether focusing on polylactide is the answer
to China's corn woes, saying it would take too long, with too much cash and
still would not use up enough corn to make much of a dent in the stockpile.
JILIN'S NEW INDUSTRY
Jilin,
the nation's second-largest corn growing province, is providing a blueprint for
how the policy could take shape.
In
a bid to revive its slowing economy, the province has been attempting to build
and finance a new industry, investing public money to coax eight companies to
make products from PLA such as plastic bags and plates.
Changchun
Shengda, a unit of privately owned Huasheng Material Tech Group is one of them.
Its experiences offer an insight into the challenges facing the smaller,
private companies.
The
company set up shop in Jilin's provincial capital in 2014, lured by free rent
at three new industrial parks and other perks, including 33 million yuan (US$4.80
million) in subsidies.
With
the original benefits now expiring, Changchun Shengda is having to move to a
smaller factory within the same park, which will cost around 820,000 yuan a
year in rent.
With
production costs rising amid limited demand for its products, Changchun Shengda
is now cutting costs to survive.
Changchun
Shengda buys PLA raw material from NatureWorks, said the company's general manager
Zhang Guangjun.
He
reckons the grain bureau's new drive to create a nationwide PLA industry could
offer a lifeline by reducing the costs of the raw materials.
Domestic
output of PLA raw material would help reduce reliance on costlier imports.
"We
still have to play it by ear. (But) the industry can't develop without policy
support," Zhang said.
China
doesn't make PLA from scratch, although state-controlled Cofco has a joint
venture with Anhui HengXing that expects to open a 10,000 tonne per year polymerization
plant by the end of this year.
That
could be expanded to as much as 200,000 tonnes per year by the end of 2018,
Qian Houxiang, general production manager of Jilin Cofco Biomaterials Co Ltd.
TOO LONG, TOO LITTLE
It
takes about three tonnes of corn to make one tonne PLA. Based on China's
current PLA capacity, that means it would take almost 400 years to work off the
corn stockpile.
"Making
plastics out of corn is like quenching the fire of a cartload of firewood with
one cup of water," said Feng Lichen, president of Yumi.com, corn industry
website based in Dalian, Liaoning province.
After
abandoning its corn security policy in 2016, the government sold off some of
its old inventory but still has more than 200 million tonnes in warehouses,
according to some estimates. Much of it is poor quality and not fit for human
consumption.
Removing
that overhang from a bloated global market could create additional demand for
corn outside China and boost prices.
That,
however, assumes in part that China makes a success out of its new biodegreable
plastics industry.
At
40-50 cents a bag, twice the price of regular plastic bags, it's a challenge to
get supermarkets to use biodegradable ones. Public awareness of the
environmental damage from making regular plastic bags is limited outside of
major cities.
Jilin,
which banned production and use of plastic bags in 2014, has pioneered what
could become a model for other regions to follow, experts said.
Other
local governments in the Corn Belt, from Jiangsu to Hainan, are considering
following suit, industry insiders say.
The
domestic market for biodegradable plastic could eventually be as big as 2-3
million tonnes per year if Beijing banned the use of normal plastic, said
Cofco's Qian.
Some
Cofco products have been certified for sale in the United States and Europe,
giving the company the potential to export, he said.
"Oil-based
products have more than a century of history, but PLA only has about 20 years.
There is a lot of work to be done," Qian said.
(US$1 = 6.8790 Chinese yuan
renminbi)
No comments:
Post a Comment