ANALYSIS: Rise of Russian sunoil exports eat into Ukraine’s share

Russian sunoil have significantly strengthened its position in the global market since the beginning of the 2019/20 marketing season due to increased availability and better quality, slicing into Ukraine’s shares in major importing countries, such as India and China.

Sunoil exports from Russia are expected to hit a record 3.1 million mt in 2019/20, up 15% on the year, on the back of a bumper sunseed crop, which reached 15.3 million mt.

“Russian sunoil share in India’s imports have increase drastically this year to 24%, and it is competing very strongly with the Ukrainian origin,” Sandeep Bajora, CEO at Sunvin Group, said at an online conference organized by APK-Inform Agency.

According to the official data, Russia’s sunoil shipments to India have surged almost 14 times this marketing year and hit over 431,000 mt by the mid-May, with India becoming the second-largest sunoil importer of Russian sunoil.

“Russian sunoil imports to India this season is going to reach 650,000 mt, which was never seen before. Thus, Russia has eaten a significant market share in India,” said Sergiy Repetskiy, managing partner at broker company Sunstone Brokers SA.

The similar situation is been observed in the Chinese market “where some players, first of all a big Chinese importer, like Sinopharm, are paying a lot of attention to develop a flow of Russian sunoil to the country this season,” Repetskiy added.

Since the beginning of the 2019/20 marketing year, China’s share in Russian sunoil exports has already tripled from 6% to 18% with 466,000 mt shipped by mid-May, making China the largest buyer of Russian oil.

Such an aggressive expansion of Russian sunoil exports to India and China is threatening Ukraine, which remains the world’s largest sunoil exporter with a 57% share in the global exports in the current season, which is equivalent to 6.4 million mt.

Ukraine will maintain its position of the biggest supplier to India with 1.7 million mt of Ukrainian sunoil to be supplied this marketing season, however “its market share is expected to reduce to 63%, while several years ago it was 90%,” Bajora said.

India’s share in the Ukrainian sunoil export has reduced as well in the first nine months of 2019/20 to 29% from 35% in the previous marketing year, while China’s share has increased, though not as sharp as in Russia – from 10% to 14%.

Tremendous popularity of Russian sunoil both in India and China fed on its bigger availability on the back of huge sunseed crop, as well as the increased quality due to better production technologies adopted at crushing plants.

“Last August, on the back of lower availability of Ukrainian origin, India tried again to import Russian sunoil, they checked the quality and recognised that it was not as bad as two-three years ago,” Repetskiy said.

Stronger demand for Russian origin has also resulted in the narrowing of sunoil price spread between Ukrainian and Russian ports on FOB basis from $20-25/mt last year to $10-15/mt this year, according to Sunstone Brokers.

Moreover, the spread between these two origins is likely to narrow further in the next season, with Sunvin Group expecting Russian sunoil to be at discount of $5-10/mt.

As of June 11, Ukrainian sunoil price for August loading stood at $772/mt FOB, while Russian sunoil price for the same loading was $10/mt lower at $762/mt FOB.