March 3, 2008

  

China sees explosive growth in use of containerised soy
 

 

Growth in exports of US soy to China in shipping containers has been explosive in late 2007,  according to a USDA attache report posted Friday (February 29, 2008).

 

In the twelve months from September 2006 to August 2007, approximately 35,500 tonnes were exported in 39 lots/contracts.

 

In the next five months following, 205,000 tonnes from 315 lots/contracts were shipped.

 

During that time period, containerized soy's percent of US exports increased from 0.3 percent to 2.6 percent of total trade.

 

While still rather small compared to the total, increases in containerized shipment has a greater than expected impact.

 

First, it shows the eagerness of the shipping industry to work with non-traditional exporters to fill some of the many empty containers that return to China from the US, the report said.

 

Second, it shows the Chinese buyers are a mix of large and small operators, which shows the dependence of smaller crushers farther inland on imported soy and their willingness to become direct importers when smaller volumes can be transported more easily.

 

The switch to containers also meant greater convenience as there are far more Chinese ports handling containers than those handling bulk shipments.

 

However, China's insistence on conducting a quarantine check on all containers is expensive and time consuming and exacerbates the resource strain, the report said.

 

Containers from one contract may also be on different boats, which causes some confusion.

 

Chinese officials have claimed that the quality of containerized shipments is uneven due to difficulties in grading the cargo and the frequency of stoppages in hot and humid tropical ports prior to final destination.

 

Similarly, US exporters have also complained that certain Chinese practices unnecessarily limit trade.

 

The mandatory quarantine check of every container is unnecessary and increases costs and delays, importers say.  They also complain that informal policy requires that only one quarantine import permit (QIP) may be valid at a given time for an exporter. Thus, importers can have only one contract outstanding with a single US exporter for one destination at a one time. Given the size of China, importers feel this limits their ability to sell containers in the various regional markets simultaneously.

 

Bigger problems loom, with some analysts speculating the Chinese authorities who are searching containerised soy now may also set their sights on bulk shipments.

 

Such a development would be problematic due to significant differences between Chinese quality and quarantine procedures and other major importer/exporters, the report said.

 

Crushers serving the inland markets would also love for the government to limit container trade so that their competitors nearer the coast would not be able to use cheap imports to compete with them in their markets.

 

Still, the report said container trade seems likely to increase in importance.