China Increases Trade Margins Following Tariff Imposition on Canada

China has enacted a 100% tariff on Canadian imports, causing prices of rapeseed meal futures to soar. The Zhengzhou Exchange has raised trading margins and minimum order sizes to mitigate volatility. These trade policies impact future supply and demand dynamics in the edible oil market.

On Tuesday, the Zhengzhou Exchange implemented a rise in trading margin requirements for certain rapeseed meal futures from 7 percent to 9 percent. This adjustment follows Beijing’s surprising enactment of a 100 percent tariff on Canadian imports, resulting in a two-day price surge that saw futures reach a five-month high. The key rapeseed meal futures contract increased by 7.23 percent, closing at 2,684 yuan per metric ton after a precedent 6 percent rise in the previous session.

The new margin requirements will take effect from the settlement on March 12. Recently, China surprised the markets by imposing a massive 100 percent tariff on over $1 billion worth of Canadian rapeseed oil, oil cakes, and pea imports, as well as a 25 percent duty on $1.6 billion in Canadian aquatic products and pork. This tariff revelation has led to increased market volatility, prompting the exchange to enforce stricter margin rules to mitigate associated risks.

In addition, the exchange has increased the minimum order size for rapeseed meal futures contracts to limit participation from smaller investors and stabilize pricing. Notably, customs data indicates that China imported 2.02 million tonnes of Canadian rapeseed meal in 2024, constituting 73 percent of its overall imports, with alternative supplies from the UAE, Russia, and Ukraine.

A trader based in China expressed concern regarding the possible losses and contract defaults importers may face due to the tariffs. They noted that while the current supply remains adequate, reduced imports could lead to future supply tightening. The demand for rapeseed meal may require monitoring in light of changes in the global trade landscape.

The Agriculture Ministry stated in its monthly report, “In the short term, this is expected to have minimal impact on the domestic supply of edible vegetable oils. However, the long-term effects of the trade policy implementation will require further attention.”

In summary, China’s recent tariff measures on Canadian imports have incited significant price volatility and prompted the Zhengzhou Exchange to raise trading margin requirements. The adjusted policies aim to stabilize the market while addressing potential risks associated with decreased imports. Although the current supply situation appears stable, the long-term implications of these tariffs warrant close observation.

Original Source: www.business-standard.com