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Mercury-Laced Baby Formula Recalled Amid China Food Campaign

Inner Mongolia Yili Industrial Group Co. (600887), China’s largest dairy producer by market value, recalled some baby formula after finding “abnormal” levels of mercury in some of its products.

The recalled milk products were made between November 2011 and May 2012, Yili, based in the northern Chinese city of Hohhot, said on its website. The company’s stock fell by the daily limit in Shanghai.

China set out this week measures to improve food safety, including tighter supervision and harsher punishments, according to the official Xinhua News Agency. In December, regulators reported that toxins were found in dairy products of China Mengniu Dairy Co. (2319), while Yili agreed to spend 1.24 billion yuan ($195 million) in 2009 to improve its operations after a tainted-milk scandal.

“In the short term, there will be pressure on Yili’s share price,” said Jason Yuan, Beijing-based head of research at Pegasus Investment Management. “This may affect investor confidence in companies in the milk powder segments.”

Yili Industrial’s shares fell 10 percent to 21.85 yuan at the close of trading in Shanghai, its biggest fall since November 2008. The company posted a 226 million-yuan net loss in the third quarter of 2008 after recalling some products found to contain melamine.

Nerve Damage

Mercury may damage the central nervous system and lungs, and may cause birth defects. Children are more susceptible to its deleterious effects.

Tainted milk killed at least six babies and sickened 300,000 others in 2008, and 22 companies were found to have sold formula made from milk contaminated with the industrial chemical melamine, prompting the government to execute two people involved in the scandal and form a food-safety commission led by Vice Premier Li Keqiang.

Li has called for harsh punishments against violations and said the nation plans to establish a long-term mechanism this year to check food safety. Food safety is important to the country’s harmony and stability, according to a May Xinhua report, citing Li.

To contact Bloomberg News staff for this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net; Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net

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