Declining demand and growing imports, or Paradoxes of China's fat-and-oil industry in 2020 - Wilmar




China is one of the largest importers of oilseeds and by-products in the world. In recent years, there has been a steady increase in the volume of purchases of these products. However, in 2020, domestic consumption of vegetable oils in China decreased due to the COVID-19 pandemic. The general director of Yihai Kerry (Shanghai) International Trading Co. Ltd, Mr. Fang Gang told us about the key changes, trade trends and development prospects of the fat-and-oil industry in China.

- Mr. Fang, how can you characterize the state of fat-and-oil industry in China amid the impact of COVID-19 on demand? Does China plan to increase import purchases of edible oils to build up domestic stocks?

- Domestic consumption of vegetable oils in China has been permanently increasing over the past 10 years. However, in 2020, it decreased by 5% compared to the previous year, from 35.14 mln tonnes to 33.39 mln tonnes. This decrease was mainly due to the reduction in the use of palm oil in the restaurant business due to COVID-19.


At the same time, import of vegetable oils, as well as grains, is gradually increasing, reaching a new high in 2020. Thus, despite the decrease of vegetable oils usage, the import of raw materials increased. For example, import of soybeans to China reached 100.32 mln tonnes in 2020. In addition, China increased the purchases of sunflower oil last year. This is due to the fact that people began to cook more at home, and accordingly, the consumption of sunflower oil increased. So, in 2020, 1.92 mln tonnes of sunflower oil were imported to China, compared to 1.16 mln tonnes in 2019. Moreover, China imported more than 2 mln tonnes of sunflower meal and 180 thsd tonnes of sunflower seed in 2020. Sunflower meal was supplied mainly from Russia and Ukraine, while sunflower seed was purchased mainly from Kazakhstan (over 60%).

- Traditionally, China is a large importer of rapeseed and rapeseed products. What are the prospects for import of rapeseed and by-products in the current season? What are the trends on the market of rapeseed, rapeseed oil and meal? Who are the key suppliers of these products to China?

- The volume of imports of rapeseed and its by-products began to grow again. In particular, in 2020, the import of rapeseed reached 3 mln tonnes, up by 0.5 mln tonnes compared to 2019. More than 70% of the total volume of rapeseed imported to China comes from Canada, 16% from Australia and only 10% from Russia. The volume of purchases of rapeseed oil, which is considered “healthier” for the domestic consumer in comparison with palm oil, amounted to 1.69 mln tonnes in 2020 (1.59 mln tonnes in 2019). The main suppliers of rapeseed oil to China are Canada (67% of the total volume), Russia (13%), Kazakhstan (3%), Australia (3%), Ukraine (2%), Belarus (2%) and the UAE (2%).

As for rapeseed meal, its import totaled 1.79 mln tonnes in 2020 (1.58 mln tonnes in 2019). Canada is the main supplier (up to 79%), and purchases are also made from Kazakhstan, Australia and the UAE. Despite the fact that Kazakhstan is a promising supplier of these products, the logistical restrictions do not allow supplying products to all regions of China, however, they are available for the north-western regions of the country.

- China increases import of flaxseed and flaxseed oil annually due to high domestic consumption. How have the volumes of purchases and the geography of imports changed over the past few seasons?

- In recent years, the volume of flaxseed import has been steadily growing. However, there was a decrease of import last year. The main reason was not a lowering of demand for flaxseed, but logistical restrictions at the Dostyk-Alashankou railway station. Therefore, China imported 375 thsd tonnes of flaxseed in January-November of 2020, compared to 430 thsd tonnes in full 2019. On the contrary, the imports of flaxseed oil increased from 49 thsd tonnes to 51 thsd tonnes. Canada, Russia and Kazakhstan were the main suppliers of flaxseed and by-products to China in 2020. Their shares were almost equal. For comparison, back to 2017, up to 80% of import of these products came from Canada, and insignificant volumes were supplied from Russia.

- Kazakhstan is one of the suppliers of flaxseed oil to China. However, logistical problems have been the main obstacle for trade between the countries in last several months. What will be the influence of the logistical restriction on the import of flaxseed oil in 2020/21 MY?

- The import of agricultural products through Alashankou is growing every year. For example, grain import amounted to 1 mln tonnes in 2020. Feed products like bran, rapeseed and sunflower cake and meal were the main products supplied through Alashankou last year. At the same time, import of vegetable oils through Alashankou increased only slightly in comparison 2019 - by 2 thsd tonnes to 150 thsd tonnes, and the main problem were congestions at Alashankou. The logistics issue is the main obstacle to agricultural trade. Current problems do not allow delivering products on time, which also hurt the reputation of entrepreneurs. If there were no current problems at the Dostyk-Alashankou station, the share Kazakhstan in overall supplies to China would be higher.

The main countries supplying vegetable oils through Alashankou are Kazakhstan and Russia, which makes them competitors on the Chinese market. For example, Russia supplies more rapeseed oil through Alashankou. Government and railway administrations of both countries should help to solve the problem with congestions on Dostyk station and increase the freight turnover between Kazakhstan and China, since measures to combat the epidemic at Alashankou significantly cut the efficiency of loading and unloading. The measures taken to prevent the spread of COVID-19 is a political issue. In my opinion, strict adherence to preventive measures will continue until spring.