China’s Soybean Importers Threaten More Defaults

CHINA’S SOYBEAN IMPORTERS are hardening their line on defaulting on contracted shipments in an attempt to force down prices in face of burgeoning stockpiles and slowing demand. China is the world’s biggest buyer of soybeans, accounting for three-ffiths of global imports. The main use for the beans is to be crushed into meal to make poultry feed. Demand for feed has fallen by an estimated 15% following last year’s outbreaks of bird ‘flu.

Since late February Chinese importers have cancelled 1 million metric tons of orders from the U.S. and South America, particularly from Brazil, though to put that in context, China imports 70 million metric tons a year. In the Chicago commodities futures markets, soybean prices have risen by more than 14% this year.

Trading firms mostly clustered in Shandong province have refused to make payments for about 20 shipments, Shao Guorui, general manager of Shandong Sunrise Group, reportedly says. Chinese buyers face losses of as much as $7 million dollars on each shipment, he adds. The crushing companies they sell onto are suffering, too, with around half the industry’s capacity idle because of over-expansion. 

Sunrise accounts for one-eighth of China’s soybean imports. It is part of Shandong Chenxi Group Co., run by Shao’s multi-millionaire brother Zhongyi.

The issue could flare up into a trade dispute with Japan.  Shandong buyers have 80 to 100 cargoes booked for delivery from the Japanese trading giant, Marubeni, through July. Marubeni accounts for a quarter of China’s soybean imports. “Marubeni is deluded in thinking that payments will come once the cargoes have sailed,” an unidentified industry executive based in Shandong was quoted as saying.

 

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