Chinese buyers resell soybean

Worries fueled over possible contract defaults

Two major Chinese soybean buyers have resold more than 500,000 tons of the product in recent weeks, sources familiar with the deals said, amid growing concerns about losses among crushers and congestion at a major port in the world’s top oilseed buyer.

The resales appear to be isolated, but they are stirring worries about possible contract defaults as crushers incur big losses due to a supply glut and a logjam in the port of Rizhao, a major crushing hub in East China’s Shandong Province.

Three years ago, during a similar period of high stocks and loss- making margins, contract defaults swept the market and traders dumped hundreds of millions of dollars of beans back into the market to avoid losses.

In the recent resales, Shandong Sunrise Group, a major importer, flipped four to five cargoes back to the market, said three China- based traders and one Singapore- based trader familiar with the issue. The sources all declined to be identified as they are not authorized to speak to the press.

Rapidly expanding crusher Shandong Sanwei Oil & Fat Group has also resold three cargoes, said two of the traders.

Eight cargoes would be equal to 520,000 tons of soybeans, worth around $ 210 million.

Sunrise and Sanwei, however, resold the cargoes much below market rates, said the Singapore- based trader, who works for a global trading company that has oilseed processing plants in China.

Staff in the international trading departments of Sunrise and Sanwei declined to comment.

The resales may have been triggered by a tightening of credit, said the four traders.

Crushers in Shandong have been losing money per ton crushed since late February, swinging to a profit for only four days in the first half of July before returning to the red.

They are currently losing 83 yuan on each ton of soybeans processed, with margins pressured by soymeal stocks that are at their highest on data from six years ago.