October 15, 2003
Asia Soybean Outlook: Premiums Steady On Firm Freight
The firm freight market will continue to keep cost-and-freight soybean premiums for Asian consumers steady in the week ahead, but hesitant buying at the high levels will put a lid on gains, trade participants said Wednesday.
"The freight (market) is just not coming down yet. I don't think premiums can be lower," said a Beijing-based grain market analyst at a global trading firm.
Participants have blamed high freight rates for the cautious buying mood so far. Although Asian buyers have signaled their interest to cover December shipments, the scale of buying hasn't matched interest, said traders.
Analysts have said freight rates for dry cargoes are likely to increase further and stay firm through the first quarter of 2004, driven mainly by China's strong demand for minerals.
"There's buying interest, but not much," said the analyst in Beijing, referring to the intentions of China, the world's biggest soybean importer.
A second trader in Beijing added that crushers are waiting for premiums to ease 10 cents.
Wednesday, premium offers of U.S. soybeans for crushing were around 188 U.S. cents-192 U.S. cents a bushel to the Chicago Board of Trade's January soybean contract, cost and freight China, for December shipment, versus 165 U.S. cents-188 U.S. cents/bu last week.
Some offers, however, were close to 200 U.S. cents Wednesday.
China is estimated to have bought around 4 million to 5 million metric tons of U.S. new crop soybeans, including tonnage for the joint-venture crushers, said traders in China.
Some crushers have started covering February-March shipments, but not recently, said traders. Generally, Chinese buyers still need to fill up December and January shipments.
Traders said freight rates from the U.S. Gulf to China have been indicated around US$50-US$52/ton and around US$44-US$49/ton from the Pacific Northwest.
China Crush Margins Good; Imports Needed
Traders said Chinese crushers are eager to import more soybeans due to good crushing margins.
In the past few months, Chinese quarantine authorities had slowed down the issue of import permits to curb the aggressive arrivals of foreign soybean cargoes. But now, the situation has changed.
"The domestic soy markets are so high and crushing margins are good. Everyone is expecting the (quarantine authorities) to issue new import permits soon," said the analyst in Beijing.
Despite the availability of the domestic crop, the demand for imports Hasn't let up, and ideas of supply tightness abound, especially amid the ongoing expansion of China's crushing industry, said traders.
Domestic Chinese soybeans were offered around 2,700-2,800 yuan (US$1=CNY8.28) a ton in North China, and CNY2,900/ton delivered to Shandong province on the central-eastern coast of China. The prices were generally up CNY100-CNY300 on week, said traders.
Japan Reluctant, But Needs To Cover
Likewise in Japan, a cautious mood will prevail. But traders said they expect buying interest to emerge if premiums manage to ease, even if only by a fraction.
"When the freight market comes down, they (Japanese crushers) will enter, reluctantly. They have to buy sooner or later, but they will do so reluctantly because prices are still generally high," said one Tokyo-based trader.
Traders in Tokyo said they expect Panamax freight rates to ease after hitting record high levels, but the downtrend is seen as only temporary.
"The freight market is still tight. Generally, everything is driven by demand from China," said a second trader with a Japanese commodities house.
Freight rate indications have climbed to around US$55/ton Wednesday, from around US$50/ton for the U.S. Gulf-to-Japan route last week, said the first trader in Tokyo.
C&F to Japan, December-shipment U.S. soybean premiums were offered at 200 U.S. cents-210 U.S. cents to CBOT January, versus around 200 U.S. cents last week.
