Escalating China/Canada Trade Dispute Is Changing Glabal Trade Flows of Rapeseeed & Canola in 2024/25

The threat of Chinese import restrictions on Canadian canola has added an additional risk to the already volatile global supply and demand outlook for rapeseed & canola in 2024/25. Make sure to subscribe to the daily OIL WORLD market update for more updates...

Chinese authorities have reportedly initiated an antidumping probe into canola imports from Canada in response to Canadian restrictions on Chinese electric vehicles last week. Canola futures reacted to the deteriorating export prospects and dropped by 4% on Sept 3. The downtrend continued in overnight trading.

However, details and timing of any measures are still unclear. Hereunder, we summarize possible implications of such a decision:

1) Timing: Statements from Chinese authorities so far only indicate a probe into potential import restrictions, creating a window of opportunity for Chinese crushers to step up imports prior to actual sanctions. Preliminary data from the Canadian Grain Commission show canola exports to China of 0.44 Mn T in July and we assume that a large part of the total August trade volume of at least 850-900 Thd T was also earmarked for China.

2) Extent: During the last trade conflict, which started in early 2019, China blocked canola imports from the two largest Canadian exporters, while shipments of canola oil and meal were not affected. The extent of the new restrictions as well as the products involved will thus be major swing factors to watch. During the previous conflict, China stepped up imports of canola oil and meal to at least partly offset a shortage of them on the domestic market.

We currently expect Canadian canola crushings to increase further this season, promoted by strong vegetable oil demand in North America and the further expansion of the Canadian crush capacity. However, Canadian crushers will have to find a home for the additional canola meal, with China the biggest buyer after the US. Canadian canola meal exports to China reached 1.0 Mn T in Jan/June 2024 (vs. 0.7 Mn T a year earlier).

3) External effects: How will global trade flows change in case of Chinese import restrictions on Canadian canola? We expect that China will step up imports of Russian rapeseed in 2024/25, promoted by this year’s record Russian crop of at least 4.9 Mn T (up 0.7 Mn T from a year earlier) and prohibitively high EU import duties on Russian oilseeds and products, which are likely to keep rapeseed crushings in Russia (primarily at plants located at the Baltic Sea) below potential.

We at OIL WORLD would also not be surprised if Chinese import restrictions on Canadian canola coincide with a lifting of the non-tariff trade barriers on Australian canola, forcing other importing countries such as Japan, the UAE and Mexico to again cover most of their requirements in Canada. Especially the UAE already emerged as an indirect “trading hub” for Canadian canola to China by importing the seed and exporting the products during the last trade conflict.