BEIJING, May 14 (Reuters) - China’s largest soy buyer Shandong Sunrise Group said it will not default on soybean contracts despite facing big losses, in order to protect its relationship with suppliers, state media reported on Wednesday.
Sunrise, which accounts for 12 percent of China’s soy imports, has previously been linked to defaults by Chinese media and traders, but the company denied last month it had defaulted on any contracts.
Buyers in China recently defaulted on at least 500,000 tonnes of soybean shipments and threatened to default on more shipments which have not yet been priced, capping a rally in soybean prices.
Shandong Sunrise chairman Shao Zhongyi said his firm would honour its purchase agreements despite facing a loss of about 200 million yuan ($32 million), as weak domestic demand means crushers are losing money for processing soy into meal and edible oil.
“Based on current prices, if we take all the cargoes as previously planned, the losses will be 200 million yuan,” Shao told the Economic Information newspaper, run by the official Xinhua News Agency.
“Despite the losses, we must honour the contracts,” he said, adding that defaults risk ruining the long-term relationships Sunrise has built with suppliers and buyers.
Shao Zhongyi is China’s 357th richest man according to Forbes’ 2012 rich list. The family made its money in the petrochemical business.
His brother, Shao Guorui, told Reuters in an interview last month that Chinese buyers could default on about 1.2 million tonnes of soybeans worth about $900 million being shipped from the United States and South America, to avoid incurring huge losses in a depressed local market.
Sunrise could not immediately be reached for comment.
Shao said some trading firms that were new to the soy industry may have defaulted on cargoes because they were unable to absorb losses. He did not name any firms.
China accounts for 60 percent of the global soy trade and top seller Marubeni has had to divert some shipments to other destinations after buyers defaulted on as many as three of its cargoes.
It is not clear if Marubeni and other sellers have agreed to revise the contracts to lower prices.
Sunrise also urged Beijing to support measures to set up China’s own pricing centre in Shanghai similar to the Chicago Board of Trade (CBOT)<0#S:> so that Chinese buyers can have more say in pricing, the Economic Information newspaper reported.
Tu Changming, a member of the board of Yihai Kerry, the China operation of Wilmar International Ltd., also called on Beijing to establish bonded warehouses for soybean and edible oils at major ports, local media reported.
This would allow it to better respond to domestic market demand, he said.
$1 = 6.2291 Yuan Reporting by Niu Shuping and Fayen Wong; Editing by Richard Pullin