The Hindu Business Line : No distress sale of soya oil seen — Little impact of China meltdown, say traders

THE heightened anticipation in some quarters of the domestic edible oil market that large number of China-bound parcels of soya oil from Brazil and Argentina may get diverted to India is unfounded, according to some of the leading players in Gujarat.

The viewpoint coming out of Gandhidham — the emerging edible oil refining hub in the country with a capacity of 8,000 tpd — is that the meltdown in the Chinese markets due to `defaults' in taking delivery will not lead to any distress sale in India.

``There are three vessels carrying about 75,000 tonnes of soya oil that is now floating around following the China problem. And the price that has fallen by $130 to $520 per tonne could drop by another $40, if the Chinese traders reject more vessels in the coming days. This phenomenon will play itself out in the next 4-6 weeks' time and this could be the period for the Indian players to cut losses suffered in the preceding months and book some profits. Till date, there is only one vessel destined for China that has taken an Indian option,'' a Gandhidham-based soya oil trader told Business Line.

While the industry watchers consider the current crisis triggered by the clampdown on credits and cut in bank loan limits in China a mere blip in the trading cycle, they admit that things could get worse as it did some four years ago when soya oil prices crashed to $350. As more vessels are likely to get rejected in China, the prices could drop to $475 per tonne, but a fair distance away from the 1999 prices, they said.

``The ripple effect in the Indian oil market would not be significant as the domestic prices were ruling at a big discount vis-à-vis international rates before the Chinese debacle. This was mainly on account of the bumper oilseed production in the country that was higher by almost two million tonnes compared to the previous year. With prices of rapeseed oil as low as Rs 30,000 per tonne, it made little sense to import high-priced soya oil. Now that there is a parity in prices, within and outside India, with the import tariff lowered by over Rs 1,600 per tonne, the oil refineries will once again look at importing crude,'' the trader noted.

The edible oil imports that had bottomed out at 2 lakh tonnes in April, before touching some 3 lakh tonnes in May, could now be seen steadying at an average 4 lakh tonnes in the ensuing months. Even then, the indications are that the current year's imports would settle at around 4.2 million tonnes, a good 1.2 million tonnes short of 5.4 million tonnes in 2003.

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