July 21, 2010

China's grain market suffers minimal impact from oil spill

Grain markets in China will be well supplied from inventories and rerouting of shipments as the clean-up of the Dalian oil spill keeps the port closed for as many as 10 days, according to reports.

The Beiliang port near the explosion site was closed due to traffic restrictions but cargoes can be rerouted to other ports nearby with grain handling facilities such as Bayuquan, Yingkou and Jinzhou, said Tommy Xiao, an analyst at Shanghai JC Intelligence Co.

A clean-up operation is underway off the coast of northeastern China's Dalian city after pipelines exploded on July 16 near the city's oil reserve base, one of China's largest. China's grain market may be "slightly affected," the China National Grain & Oils Information Centre (CNGOIC) said Tuesday (Jul 20).

China's internal corn trade, shipping the grain from the northern corn belt in Jilin, Liaoning, Heilongjiang and Inner Mongolia, to the main consuming areas in the south, will be unaffected because of rerouting, Xiao said.

A dark-brown oil slick has stretched over at least 183 square kilometres of ocean near blast-hit Xingang port, with 50 square kilometres severely affected, according to reports. Workers and fishermen using oil-spill dispersant and absorption felts have been operating and have collected some of the spill.

"We estimate that Dalian port has more than 400,000 tonnes of soy inventories, enough to satisfy the local crushers for at least half a month," Xiao said. "The crushers also keep sufficient inventories at hand so their operations won't be affected unless the clean-up process is prolonged."

There are three main soy crushing plants near Dalian - owned by Nissin, Jiusan and Wilmar, respectively, that use a combined 15,000 tonnes of raw material a day, he said.

"Those cargoes that have arrived but are waiting for unloading might get delayed, but the impact on market prices and trade is minimal so far," he said.