SHANGHAI/BEIJING (Reuters) - A rally in China’s rapeseed oil futures is pushing its price spread with other edible oils to the widest in years, with lower imports of the oilseed from Canada and tightening supplies spurring trading interest and volumes.
The spread between rapeseed oil COIcv1 on the Zhengzhou Commodity Exchange and soyoil on the Dalian Commodity Exchange DBYcv1 widened to as much as 2,500 yuan ($357.50) per tonne on Tuesday, the greatest it’s been since 2012 when Refinitiv began recording prices for the two commodities.
Rapeseed oil prices have gained nearly a third since May 27, when the chief financial officer of Chinese telecom giant Huawei Technologies Co Ltd lost a court fight in Canada against extradition to the United States.
China and Canada have been locked in a trade and political dispute since Meng Wanzhou was arrested in Vancouver in December 2018 on a U.S. extradition request, hampering rapeseed and other commodity shipments between the two countries.
(Graphic - China edible oils prices and spreads: here)
“There is just not enough rapeseed oil. We cannot bring in rapeseed now. Crush margins are super high. The trade is totally affected by policy now,” said a China-based trader.
“Rapeseed imports might continue to be affected as the tension between China and Canada has not eased, while Sino-Australia relations do not look very optimistic,” the trader said, citing Australia as another rapeseed producer.
Gains in Zhengzhou’s rapeseed oil prices, which hit a 3-1/2-year high on Tuesday, also increased its spread with Dalian’s palm olein futures prices DCPcv1 to its widest in seven years at 3,196 yuan per tonne. [POI/]
Dalian soyoil and palm olein prices have also been buoyed by spillover buying and concerns of lower palm oil output in Malaysia, but rapeseed oil has been the best performing edible oil of the three since June.
“Rapeseed oil has become a momentum trade with people chasing prices higher and adding to positive sentiment in the (edible oils) space,” said brokerage StoneX, formerly INTL FCStone, in a research note.
(Graphic - China edible oils prices and open interest: here)
Reporting by Emily Chow in Shanghai and Hallie Gu in Beijing; Editing by Tom Hogue