Marubeni Corporation is requiring its Chinese buyers of soybeans to obtain secure letters of credit (L/Cs) for their imports amidst an increasing number of defaults.

Meanwhile, the Japanese trading giant's exposure to soybean cargoes not backed by L/Cs is falling according to its president.

Defaults

Trade sources suggest that Chinese buyers have defaulted on as many as three Marubeni soybean shipments in recent months.

In April it emerged that Chinese importers unable to open L/Cs had defaulted on at least 500,000 tons of US and Brazilian soybean cargoes worth around US$300 million (DC World News, 17 April 2014).

Declining exposure

Marubeni, which ships more soybean than any other supplier to China, is expecting a decline in its exposure to defaults its president, Fumiya Kokubu, said after a mid-May results briefing.

"We have about 20 late May, early June cargoes we're aiming to sell to China that have already been loaded and now are gradually having L/Cs opened on them ... so our exposure to [cargoes] that do not have a promptly opened L/C is declining," he said.

According to one commodities specialist, more defaults are expected as Chinese buyers face tougher credit requirements from banks and weaker local demand for soybeans.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.