It was quiet at the huge soybean crushing plant in northern China, with few workers to be seen and not a patch of smoke spewing from its chimney into the blue autumn sky. Officials said the Dalian Huanong Group plant, one of China's top three domestically owned companies to process soybeans into vegetable oil and soymeal, was down for scheduled maintenance.
But a calamitous series of defaults in April, when international soybean suppliers suffered losses of up to $300 million after Chinese crushers ran out of cash to pay for imports, remains fresh in the memory.
"The industry has been hit by an earthquake," said Tian Renli, president of Jiusan Oil and Fat Co Ltd, another major Chinese soy crusher.
With annual capacity of more than 4 million tonnes, Dalian Huanong is one of many Chinese crushers to suffer from the soaring cost of imported soy and plummeting meal demand at home.
Demand for soymeal in China, the world's top importer of soybeans, amounted to less than half of the country's total crushing capacity, industry officials and analysts said.
Lu Zhanbin, an executive at Dalian Huanong, told Reuters the company's plants throughout China had recovered following the defaults on high-priced soybeans from South America.
"Our production is back to normal," Lu said from the company's headquarters, about 40 km (25 miles) north of Dalian in China's north-east province of Liaoning.
But industry officials and analysts said Huanong, which has built five new plants around China in the last four years, would be hard pushed to secure enough soybeans to run at full capacity.
They added China's 60 million-tonne capacity crushing industry would need a painful restructuring to bring it more closely in line with the 25 million to 27 million tonnes currently required by its domestic market.
With some 90 crushers fighting for survival, some were only able to make money in the short periods during which rivals were forced to wind down, as happened in September, officials said.
"Since October, things have deteriorated rapidly," said Shinsuke Tokue, president of Dalian Nisshin Oil Mills Ltd, a unit of Japanese crusher Nisshin Oillio.
"When profit margins improve, many companies resume operation. You can't keep good margins for a long time."
Officials said Chinese crushers' margins, or the profit they make on each tonne of beans processed into oil or meal, had evaporated again since October.
They had recovered to between $40 and $60 in September. From late 2003 until August this year, crushers had been losing $40 to $50 on each tonne processed.
Many crushers stopped operating in September as they could not buy enough foreign soybeans following the crisis.
Customs data showed Chinese soy imports in the first 10 months of 2004 fell 15.7 percent to 15.52 million tonnes.
But with more than 2 million tonnes of US soy expected to arrive in November and another 2 million tonnes in December, some officials are now worried soymeal prices will sink lower unless demand rebounds ahead of the Lunar New Year in February 2005.
Some crushers had already cancelled or deferred US soy cargoes and, unlike in the past, none had started booking cargoes from the new South American crop, to be harvested after March, the officials said.
But the road back for China's crushing industry would be long and arduous, especially as some financially strapped crushers were still trying to buy soy cargoes, they said.
Those with deeper pockets, such as Jiusan in China's top soy producing province of Heilongjiang, or Nisshin Oillio, were even starting new facilities.
Crushing margins would continue to swing, although the officials said a return to minus $40 or minus $50 was unlikely, as international suppliers were reluctant to sell to those with a history of defaulting.
"It seems we are either over-crushing or under-crushing," said an official for a crusher in southern China.
"Still, the chance of over-buying is much more limited now."