Chinese Defaults: From Sweet To Sour

A Reuters report says that "The spectre of commodity defaults looms large in Asia as buyers walk away from deals sealed before the price plunge, and analysts fear the worst is yet to come, compounding the woes of industry hit by tighter credit."

The report goes on to say that international buyers have defaulted on contracts for palm oil, rubber, cocoa beans, rice, iron ore and soybeans signed before the plunge in commodity prices.

It may not surprise you to hear that Chinese buyers are said to be the main culprits, the credit crisis having provided a perfect opportunity for buyers to attempt to walk away from high priced contracts.

In one extreme case a British scrap metal dealer said he was abducted and held for several days while seeking $1.2 million (740,000 pounds) in payment from customers in Ningbo, eastern China.

Meanwhile in Indonesia it's sellers who are defaulting. Coffee exporters there crucially normally agree on export commitments but delay decisions on prices until after beans have been delivered. Defaults are now rife after London futures dropped to a 17-month low recently.

Today, an Indonesian bank is reported to have seized more than 10,000 tonnes of beans from an exporter in Sumatra following a repayment dispute.