April 15, 2014
China importers default on US and Brazilian soy cargoes
Chinese importers, who import 60% of the soy traded in the world, have defaulted on at least 500,000 tonnes of US and Brazilian soy cargoes worth around US$300 million, as buyers struggle to get credit amid losses in processing beans, reported Reuters.
The default on 500,000 tonnes of soybeans, the biggest since 2004, would likely cap a rally in global prices as they coincide with bumper supplies from Brazil and Argentina hitting the market.
A string of defaults on loans, bonds and shadow banking products in recent weeks has highlighted rising credit risks in China, partly fuelled by signs the economy is slowing.
"There are five to six (panamax) cargoes which are unable to be unloaded at ports because buyers cannot open LCs (letters of credit) and there are no LCs for an additional 5-6 cargoes floating on the sea," one Beijing-based source said. Each panamax cargo is for 50,000 to 60,000 tonnes.
Exporters, in a bid to gain a foothold in the lucrative Chinese market, sometimes ship cargoes when importers do not have confirmed letters of credit, trusting buyers will honour their commitment. The practice was briefly abandoned after the wave of defaults in 2004 but slowly resumed.