Faced with slowing economic growth and indications that the government is increasingly reluctant to step in when a loan goes bad, Chinese banks are becoming more selective about whom they lend to and buyers have recently defaulted on U.S. soybean shipments. Commodities have often been used for financing, and traders and industry officials estimate that approximately 70% of China’s palm oil imports are connected to this financing. China produces no palm oil domestically and is second in imports only to India which accounts for approximately 15% of global trade. With domestic palm oil prices dropping, buyers not willing to sell at a loss are stockpiling palm oil at Chinese ports. Stockpiles have climbed to 1 million tons from the usual 600,000-700,000 tons with one palm oil producer in Malaysia stating that China will not allow further imports because storage tanks are at capacity. Estimates are that China’s palm oil imports could decline by half of a million tons this year.
To receive relevant news stories with summaries provided by GAI Research & Insight, subscribe to Global AgDevelopments, our free weekly enhanced eNews service