China reshuffles soy trade to counter local glut and US tensions
The Asian nation is stepping up rare exports of soybean oil, as domestic consumers cut back on restaurant visits and rising global demand for biodiesel makes prices attractive enough to send it abroad. Meanwhile, China is testing deliveries of soybean meal from Argentina for the first time, a substitute for importing beans and crushing them into animal feed at home.
Both shifts, while modest in volume, mark a departure from longstanding trade flows. They also include a means for the country to chip away at its need for American soybeans if the trade war between Beijing and Washington persists.
China exported about 127,000 tonnes of soyoil in the first half of the year, exceeding full-year 2024 levels, according to customs data. The shipments are flowing to destinations including South Korea, Malaysia and India, where edible oil demand remains robust.
The trend 'reflects a global supply-demand rebalancing in the vegetable oil market', Fu Bo, a senior analyst at Guotai Junan Futures, said in a note. 'The rising exports are the result of China needing soybean meal while other countries need soybean oil,' he said.
Global soyoil markets remain supported by strong biofuel demand in the US, where about half of local production is used to produce renewable diesel. Meanwhile, domestic biofuel blending mandates and less competitive prices in South American nations such as Brazil and Argentina have limited additional supply.
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At home, China is grappling with the opposite problem: a glut. Commercial inventories of soyoil have surged 70 per cent since May to an elevated level of 1.12 million tonnes, according to Shanghai-based commodities consultancy Mysteel.
Chinese crushers have kept run rates high to ensure there's enough soymeal for livestock rations, creating the unusual arbitrage opportunity of exporting surplus oil from a country better known for its imports.
On the meal front, China is exploring a new supply channel from Argentina. Bunge Global recently sold at least two shipments of the high-protein feed ingredient to Chinese buyers.
Beijing approved Argentine soymeal back in 2019, during trade hostilities with the first Trump administration, but purchases didn't materialise until now. Argentina's move to reduce export tariffs has improved the competitiveness of its meal. But the shipments also suggest that Chinese buyers are keen to hedge against uncertainty in US supplies as Beijing and Washington joust over trade once again.
'China has plenty of crush capacity,' said Arlan Suderman, chief commodities economist at StoneX Financial. 'But its recent purchases of Argentine soymeal send a statement to the US that it's willing to sacrifice that capacity to avoid buying US soybeans if Brazil can't fully meet its needs.' BLOOMBERG
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