March 24, 2004

 

 

China Set To Become Top Soyoil Importer

 

China will overtake India as the world's top importer of vegetable oils this year as high global soybean prices have slowed Chinese crushing activity.

 

Traders and industry sources see China, the world's most populous country, buying up to 5.5 million tons of palm and soy oil this year, up from 4.2 million ton last year.

 

This will coincide with India importing about 4.5 million ton, down from 5.1 million in 2003, as timely monsoon rains have yielded a bumper oilseed crop on the subcontinent.

 

"They (Chinese) are importing more and more of everything, from steel to edible oils," said chairman of the Central Organisation of Oil Industry and Trade in India, Sandeep Bajoria.

 

"I expect Chinese vegetable oil imports to cross five million ton in 2004 and we will stay around 4.5 million," he said.

 

As well as slow crushing in China, which is trimming its soy imports from last year's record 20.74 million ton, consumers are using more lower-priced palm oil as Chicago Board of Trade (CBOT) soy futures hover at their highest levels since mid-1988.

 

"They (Chinese consumers) are shifting to more acceptance of palm oil," said an oils trader in Singapore.

 

"Obviously, it's price driven. More and more palmoil is used for direct consumption, instead of blending."

 

Traders said palm oil, produced in Malaysia and Indonesia, was about $100 a ton cheaper than soy oil from South America, seen at around $685 per ton, cif China, from below $400 a year ago.

 

They expected China to use up all its 2004 low-tariff palm oil import quotas, totalling 2.70 million ton, after imports of 2.33 million ton last year. China was also buying other palm products, like stearin, for which there were no quotas.

 

"It's not a one-off," said executive director of India's Solvent Extractors' Association, B V Mehta. "Every year we'll be competing with China for the number one slot...in edible oil imports."

 

But not everyone is convinced.

 

In future, China may opt to import more oilseed for home crushing, once animal feed demand catches up with huge capacity increases in the crushing industry, traders said.

 

While India has been a major exporter of soymeal, used as a protein source in animal feed, China has consumed almost all the soymeal produced from imported soy. It has even bought some meal from India at times of shortage.

 

As Chinese get used to having more money, they are eating more poultry, pork, fish and dairy products, boosting animal feed demand.

 

Though rapid economic growth has also raised Indian vegetable oil consumption, it has not boosted meat consumption in a country where many people are vegetarian, traders said.

 

So far, expectations that India would one day stop exporting soymeal because of rising domestic demand have not materialised.

 

"Here we are in 2004 (and) India has its largest ever soymeal exports," said one trader, referring to 2003-04 exports seen topping three million tonne, more than double the previous year.

 

"They (Indians) are predominantly vegetarian (and) oil imports are going up as they can afford to eat more. But, they're not going to eat more meat...The last round of bird flu probably scared off any wavering carnivores," the trader added.

 

India's Central Organisation for Oil Industry and Trade said rains would push up the 2003-04 oilseed crop to 23.8 million tonsfrom a previous 14.9 million tons, which included some 6.85 million tons of soybeans.

 

China is expected to import 18-20 million tons of soybeans alone this year, in addition to a domestic crop of 17.5 million tons. Traders said China's 2004 soyoil imports were likely to increase to 2.5 million tons from 1.88 million last year.