Importers default on soybean cargo

Chinese importers have defaulted on at least 500,000 tonnes of US and Brazilian soybean cargoes worth around US$300 million (HK$2.34 billion) as they struggle to get credit due to losses in processing beans, trade sources said yesterday.

Three companies in the eastern province of Shandong had defaulted on payments for the shipments as they were unable to open letters of credit with banks, said one Beijing-based source.

"There are five to six [Panamax] cargoes which are unable to be unloaded at ports because buyers cannot open LCs [letters of credit], and there are no LCs for an additional five to six cargoes floating on the sea," the Beijing-based source said.

Each Panamax cargo is for 50,000 to 60,000 tonnes.

With negative processing margins and tightening credit, sources said there could be more defaults on cargoes of soybeans, crushed to make cooking oil and animal feed ingredient soymeal.

Crushers are losing 500 yuan (HK$623.70) to 600 yuan for processing a tonne of soybeans, compared with a 600 yuan profit in the fourth quarter of last year during peak consumption.