Chinese importers' defaults on soybean cargos may add to the steady drumbeat of debt concerns on the mainland, but commodity defaults aren't terribly unusual and the soybean business has been rotten for a while, analysts said.
"We've seen it before in the coal sector," said Sam Le Cornu, a senior portfolio manager at Macquarie. "It can happen in any commodity if there's a volatile move in the underlying price," he said, noting "commodity prices are very difficult to forecast with accuracy."
Chinese importers defaulted on at least 500,000 tons of soybean cargos worth around $300 million recently, the most since 2004, as some companies were unable to open letters of credit with banks, Reuters reported Thursday, citing industry sources.
Some of the companies defaulting had been using soybean imports to secure cheap financing via letters of credit carrying rates as low as 2 percent, with some selling the oilseeds at a loss to use the funds for more profitable businesses, the sources said, according to the report.