Crush plants shut down as China energy consumption policy bites

Tens of soybean crushing plants have been ordered to shut down in China, particularly in Jiangsu and Tianjin, as provincial governments have curbed electricity supplies to the sector in a bid to meet stringent emission targets, several industry sources told Agricensus Thursday.

The curbs came as provincial authorities meet the central government’s energy saving plan – formally called “Dual Control System of Total Energy Consumption and Energy Intensity” – in order to reach President Xi Jinping’s goal of carbon neutrality by 2060.

The system requires each provincial government to set an energy intensity target and build up lists of high energy consumption and energy-intensive industries, China’s National Development and Reform Commission (NDRC) has said.

Some provinces had been warned by Beijing that they are falling behind their targets and have urged them to make more efforts to meet their environmental goals this year - leading some to enforce shutdowns at critical manufacturing infrastructure.

Moreover, a shortage of coal in the domestic market and surging energy prices this year have also pushed local governments into rationing electricity usage to ensure stable energy supplies in the coming winter.

Dozens of factories in those industrial powerhouses, such as Jiangsu, Tianjin, Zhejiang, have been ordered to cut or halt their operations, including some major soybean crushing plants, according to industry sources and local media.

“(For those oil plants), operation suspension mainly started in Jiangsu last week, and this week in Tianjin,” a China-based trader told Agricensus.

According to local media, crushing plants of LDC, Beijing Grain Group, and Jiusan located in Tianjin issued urgent notices to halt operations due to power rationing on September 22.

Operational rates of oil plants in East China, the region with the highest crushing capacity, dropped to only 40% last week and are expected at 45-50% in the next few weeks, according to industry sources.

“(Lower production) would support high prices for soyoil and soymeal. But it also depends on how long (the power rationing) would last,” a trader said.

Soyoil contract of November on the Dalian Commodity Exchange jumped by nearly 2.7% on Thursday, in line with the contracts for later in the month that surged as much as 2.9% on the day.

At the same time, curbing electricity has also raised more concerns over those high energy-consuming industries, including fertilisers.

“The price of urea has shot up,” a trader said.

Urea futures on the Zhengzhou Commodity Exchange rallied by the daily limit on the first day after the mid-autumn national holiday at the start of this week, and hit their highest level on record.

China’s state planner urgently reacted on Wednesday and vowed to maintain the supplies of fertilisers in the domestic markets, according to a notice from the NDRC website.