China’s oil plants shutting down due to soybean shortage

Lack of the oilseed in oil plants means suspending operations across north and south regions of China

Some soybean crushing plants across China from north to south regions are in or have planned suspensions to operations, industry sources told Fastmarkets Agricensus.

The shutdown came as deteriorated domestic crush margins heavily weighed on Chinese buyers’ buying interests for soybeans, causing shortages of the oilseed in oil plants.

According to sources familiar with the matter, crushing plants of Bunge located in Tianjin have halted operations for 49 days from February 14 to April 3, and the company’s plants in Nanjing issued notices to shut down for almost one month from late February to March.

At the same time, plants of Louis Dreyfus Company (LDC) in Tianjin and Cargill in Hebei Province will stop their operations from next week.

According to a report from China’s industry consultancy Mysteel on Friday, many crushing plants in China’s southern province – Guangxi – have shutdown schedules in March.

China’s domestic crush margins deteriorated sharply into negative territory since China returned from its week-long Lunar New Year holiday earlier this month, according to Fastmarkets Agricensus’ assessments.

Import costs for soybeans paid by Chinese crushers have shot up as weather concerns over South American crops boosted the skyrocketing in CBOT soybean futures and spot premiums in Brazil’s market.

Meanwhile, demand for soymeal, one of the major products crushed from soybeans, from downstream industry weakened due to the plunge of hog prices since mid-December 2021.

Chinese buyers have had to slow down the pace of purchases for soybeans from the global markets, particularly for crops in the current marketing year, according to trade information tracked by Fastmarkets Agricensus.

Moreover, some Chinese soybean processors have cancelled, known in the trade as washouts, for around 10 to 12 cargoes of Brazilian soybeans since last week.

Slow importing and pre-holiday consumption weighed on China’s domestic soybean stocks in major oil plants remained at low levels in recent weeks.

According to data from China’s National Grain and Oil Information Centre (CNGOIC), soybean stocks last week came in at 3.95 million tonnes, 1.5 million tonnes lower than the level recorded at the same point in 2021.

In Guangxi province, only two oil plants have soybean stocks while other plants have no soybean left, according to Mysteel.

The market is probably waiting for China’s government to release soybeans from its reserves to ease the tight supply, a China-based trader told Fastmarkets Agricensus.

Rumours have circulated widely in recent days that Sinograin, China’s state-owned stockpiler, would sell soybeans from its reserves to cover the country’s demand from March to May, and the released size was heard to be as much as 5 million tonnes.

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