Cheap imports hurt Chinese milk powder producer

BEIJING -- Milk powder manufacturer Beingmate's plans to invest in a project to boost its supplies of raw materials may be unnecessary in light of price cuts that have made foreign milk powder cheaper to purchase, media reports said on Saturday.

Prices for bulk milk powder imported from New Zealand have been lower than 24,000 yuan ($3,800) per tonne since August, while bulk milk powder from European countries costs even less, the reports indicated.

In contrast, the price of domestic milk powder currently stands as high as 34,000 yuan per tonne. Beingmate's pasture project, which was approved on August 10 by the company's board of directors, will not make much of a dent in the price gap, experts from the China Investment Corporation said.

Dairy farmers in Northeast China's Heilongjiang province, where Beingmate was planning to construct the pasture project, confirmed that the price for fresh milk alone should be above 30,000 yuan per tonne, according to a report in the China Times.

The company's gross profit margin has dropped for the last three years and currently stands at 64.42 percent, according to the company's financial report for the first half.

Although using imported milk instead of domestic milk as a raw material may be a better choice for the time being, the situation may be unstable in the long run, as milk powder manufacturers depend on a steady stream of raw materials, experts said, adding that milk powder companies should invest in foreign pastures to improve their competitiveness.