China's grain storage project

by Teresa Acklin
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An ambitious plan to build 25 million tonnes of new grain storage in China is progressing rapidly.

   China's program to add 25 million tonnes of grain storage is making rapid progress and follows on the heels of another ambitious grain storage project that is still under way.

   China Daily in December reported that China's “ambitious plan to expand or build 388 grain warehouses to store 25 million tonnes of grain is proceeding smoothly. More than half the construction projects were under way by the end of October, with the rest proceeding.”

   Observers of the so-called 18B project — named for the 18-billion renminbi (U.S. $2-billion) cost of the project — said few regarded the plan as feasible when it was first mentioned 12 months ago. “Most expected that, as so often happens in China, the plan would be dropped before it reached implementation,” one observer said.

   Premier Zhu Rongji's plan for massive government expenditure on the expansion of the country's grain storage capacity is not only part of the central government's spending drive aimed at propping up the country's declining rate of economic growth, but goes hand-in-hand with new controls on the marketing and distribution of grain (see related story on Page 29.)

   Until the unveiling of the 18B project, the yet-to-be-completed World Bank Grain Distribution and Marketing Project (GDMP) in China ranked by far as the largest grain storage project in history, with a U.S. $1-billion budget. It involves the construction of 5 million tonnes of new storage together with widespread infrastructure developments.

   An engineering consultant who has been involved in the World Bank project in China described the rate of progress on the 18B program as “amazing.” Noting that the first announcements of the 18B program were made no more than 12 months ago and called for the entire project to be completed by the end of 1999, the consultant said, “Compared to the World Bank's G.D.M.P., now in its sixth year of implementation with at least another two years before completion, this is a truly remarkable state of affairs.”

   Progress on the World Bank program has been slowed by its focus on the introduction of new technologies aimed at facilitating the movement, rather than the storage, of grain, it was noted. “It has taken time for the Chinese industry to come to terms with some of the new ideas that the G.D.M.P. has brought with it, and delays have arisen through the World Bank's close supervision of the project aimed at ensuring its integrity and suitability,” the consultant said. “By comparison, much of the 18B project funding is being spent on traditional unmechanized warehouse storages, which are quick to design and construct, though more intensive in the use of land and labor than the G.D.M.P.'s mechanized silos. Nevertheless, 18B incorporates a significant proportion of mechanized silo storages, some of which are remarkably large in size and scale.”

   Some 20% to 25% of the total new storage capacity will be in the form of silo storage, most of which will be “squat” silos (large diameter with relatively short walls). Examples of these are being constructed in the new Beijing Central Grain Depot in Changping, approximately 30 kilometers north of the city near the Ming Tombs. Concrete silos measuring 14 meters tall by 30 meters in diameter are being constructed, with a capacity of 10,000 tonnes each.

   The rapid rate of construction contrasts with the construction of the depot and its unfinished 50,000-tonne silo block being built as part of the G.D.M.P., which began in 1995.

   An even more prestigious component of both the G.D.M.P. and 18B projects is in progress at the new Xizui Grain Terminal just outside the port city of Dalian, at the southern tip of Liaoning Province in the northeast of the country. Two and a half years ago, Xizui was a remote fishing village perched on the edge of a mountain, barely visible to and largely unknown by the inhabitants of Dalian City. Since then, under G.D.M.P. funding, the mountain has disappeared — transformed into a new breakwater and land-fill area. New wharves have been constructed to service vessels of up to 80,000 dwt. A new 12-km rail connection has been constructed, including a 1-km tunnel, as has a new 400,000-tonne grain silo block.

   “The speed of the construction work for such a large and complex project has been amazing, and the scale of the work is stunning by any standards normally associated with grain storage projects,” the engineering consultant said. When completed, the Phase 1 (G.D.M.P.-funded) component of the new Xizui terminal is planned to ship 9.3-million tonnes of maize annually from the northeast provinces, for consumption in central and southern China, and to import up to 3 million tonnes of wheat per year for consumption in the northeast.

   Such rates will be achieved with two 2,000-tonne-per-hour ship loaders, currently under construction, and two 1,000-tph ship unloaders.

   Several kilometers of rail tracks have been constructed within the terminal complex to handle the 45-car unit trains that are expected to bring the grain to the port each day. Emptying of these trains will be carried out on-the-move through two large dump hoppers currently under construction.

   One hundred and forty 3,000-tonne concrete silos have been constructed to service these throughputs, each of which will have an average grain turn-around time of no more than 15 or 20 days.

   “While the scale of the G.D.M.P. component of the Xizui project is impressive, the Phase 2 component funded through the 18B project, is, from a grain storage point of view, even more so,” the consultant said. Construction began in August, and already the walls of 10 of the planned 20 new silos have been constructed, each 32 meters in diameter by 45 meters high. Each of these enormous silos will hold close to 30,000 tonnes of grain, which should make them the largest vertical silos in the world.

   Construction of the 20 new silos will take the total storage capacity of the Xizui terminal over the 1,000,000-tonne mark, which will just exceed that of Kwinana terminal in Western Australia, giving Xizui claim as the largest grain terminal in the world.

   Xizui's Phase 3 project will involve the construction of a further 300,000 tonnes of storage. Construction is expected to begin in the very near future, once detailed design has been completed, though it is uncertain at this stage whether they will consist of silos or warehouses.

   The 18B project replaces Premier Zhu's earlier plan to boost employment and utilize existing infrastructure by converting defunct government factories into grain storages. This plan was abandoned when it was found that few factories were suitably located to ease the storage problems in the grain production areas, and even fewer had suitable buildings that could be converted into grain storages.

   Whatever economic benefits will come from this short-term injection of huge amounts of money into the grain sector, it is likely that the new storages will find themselves in full use as soon as they are completed, observers said. The grain storages can be expected to absorb some of the huge stockpiles of grain that have been accumulating in some production areas, particularly in northeast China, as a result of government policies and subsidies.

   For several years, China's government has wavered on the question of grain subsidies involving the expenditure of billions of renminbi annually in support of grain procurement prices, and in payments to depots which encourage the storage of grain rather than its distribution and sale (so as to maintain China's huge “strategic” stockpiles).

   The past several years have seen moves to deregulate the industry, including threats to cut out subsidies altogether. But each time the government has retreated to its traditional position of maintaining full control over the industry. Indeed, a move in this direction was confirmed only in the last week or two when Premier Zhu pronounced new and tighter controls. These controls include:

   • Government-set minimum payments to farmers;

   • A decree to all government grain-receiving depots that they must borrow from the Agricultural Bank of China whatever funds are required to pay for any grain that farmers wish to deliver;

   • A decree that government depots must pay their way by selling their grain at a profit sufficient to cover their operating costs;

   • A decree that no grain is to be allowed to be bought privately at discounted prices, or otherwise to bypass the central storage system.

   Presumably, the idea behind this plan is for the cost of farm-price subsidies to be paid by consumers, by ensuring that they are passed down through the distribution and processing chain. However, sources within the industry predict that the net effect will be to increase illicit sales of grain at discounted prices through private arrangements between farmers and processors.

   Far from being assured of increased incomes as a result of these decrees, farmers are already experiencing difficulties getting paid by the depots, because the depots are having difficulty obtaining funds from the Agricultural Development Bank.

   Nevertheless, with the application of policies like these, it is likely that there will no shortage of grain to put into the government's new storages for some time to come.