Singaporean importers of Chinese soybean are finding letters of credit (L/Cs) hard to come by due to adverse factors across the industry.

Producers are facing possible contract defaults as crushers incur big losses due to a supply glut and there is a major logjam in the port of Rizhao, China's major crushing hub in eastern Shandong province.

Tightening credit

As a result of these conditions, banks are tightening credit. This is prompting sellers to take the risky decision to dispatch shipments before the buyer has obtained an L/C.

Some importers in Singapore have been unable to get L/Cs according to reports there.

Chinese credit

The position of Chinese banks is unclear. They are tightening credit for the sector, but whether the soybean trade is being singled out is far from clear because China's banks are embarked on a wider clampdown on lending across the economy.

Beijing is determined to curb lending due to a rapid build-up in debt last year.

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