May 6, 2010

China, the biggest user of cooking oils, may relax a barrier on imports of soyoil from the US after it halted shipments from Argentina, analysts said.

The government will discuss ways to secure supplies from the US with top state-owned vegetable oil trading companies, according to recent reports.

China last month halted shipments from Argentina, the world's biggest supplier, as part of a widening trade dispute. The government last week told representatives from companies including Cofco Ltd. that it will maintain the embargo and buyers should seek supplies from Brazil and the US.

"There has been speculation that China may be seeking additional sources to ensure supply," said Tommy Xiao, analyst at Shanghai JC Intelligence Co. "Though it's likely a final decision hasn't been reached."

Nearly all of China's soyoil comes from Argentina and Brazil, customs data showed. Imports of crude soyoil from the US have been mostly barred because of a procedural dispute, according to a representative from the US agriculture industry, who declined to be identified.

China requires the US government to provide exports of crude soyoil with a phytosanitary certificate, which certifies the product is clear of pests and other diseases. The US has resisted because it believes soyoil to be a processed product and views the requirement as an administrative barrier, according to Xiao.

The negotiations between China and the US are ongoing and the US hasn't made any concessions, therefore news of China relaxing its controls comes as a surprise to the US, he added.

China imported 784,157 tonnes of soyoil in the six months beginning October, according to customs data. Argentina supplied 80%, while Brazilian exports accounted for 19.2%.

Imports for the six-month period a year ago totalled one million tonnes and the two Latin American nations contributed to similar proportions, according to data.

China's central government assumed full control of Argentine soyoil imports from the provinces from April 1. The move was in response to Argentina's anti-dumping investigations on Chinese goods ranging from steel pipes to textiles, the state-backed China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce & Animal By-Products said in March.