Why India is purchasing soyabean oil from China
What's the story
India has made a rare purchase of 150,000 metric tons of soyabean oil from China in recent months. The step comes as Chinese suppliers have offered discounts due to a supply glut. The exports will help Chinese crushers cut down their inventories that have surged after China's soybean imports hit a record high in May.
Strategic purchases
A look at the discounts
Indian importers have secured soyabean oil for shipment between September and December. The sellers offered a discount of $15 to $20 per ton compared to South American supplies. A New Delhi-based dealer with a global trade house told Reuters, "Chinese soybean crushers are struggling with excessive soymeal and soyoil. To reduce inventories, they are shipping oil to India."
Price advantage
Lower freight costs give China an edge
China, a net importer of soyoil and palm oil, is offering crude soyabean oil at around $1,140 per ton for December quarter shipments. This is lower than the $1,160 per ton price from South America. Lower freight costs have also given China an edge over South American suppliers as shipments from China take two to three weeks to reach India, compared to over six weeks from South America.
Import dependence
India meets most of its demand through imports
India meets almost two-thirds of its vegetable oil demand through imports by private companies. These include palm oil from Indonesia and Malaysia, as well as soyabean oil from Argentina and Brazil. India's yearly cooking oil requirement is huge, and it could purchase even more from China if offered at competitive prices, said Sandeep Bajoria, CEO of Mumbai-based vegetable oil brokerage Sunvin Group.