Mitsubishi Corporation’s decision to buy 20% of Singapore-based commodity trader Olam International reflects growing food demand in emerging markets, IHS Maritime has been told.
Japan’s biggest trading house will buy 12% of Olam through subscribing to 332.2 million new shares for USD915 million. It will also buy an 8% stake from Kewalram Chanrai Group for USD615 million.
The deal would alleviate any concerns with Olam, after investor research outfit Muddy Waters questioned its accounting practices in 2013.
An industry source told IHS Maritime, “Olam is now majority-owned by Temasek Holdings (Singapore government’s investment firm) so there is less concern over its finances. Olam has grown into one of the world’s biggest commodity traders and is a market leader in cocoa, cashew nuts, rice, and cotton.”
Olam sources around 44 agricultural products from over 50 countries, including nuts, grains, sugar, and packaged foods.
Its Durban freight desk handles shipping for Olam’s African and Atlantic grains business and sugar cargoes from Brazil or Atlantic and rice cargoes into West Africa.
Olam told IHS Maritime that on average, the company operates 15-20 bulkers, namely Handysizes and Supramaxes, and these are fixed on time-charter and spot trips.
The source said, “Rice is typically shipped from China and India to Africa and we do carry third-party cargoes from South America to the Far East.”
In the year to 1H15, Olam shipped 5,586,700 tonnes of cargoes, down 25.7% year-on-year. It attributed the decline to its strategy to prioritise trades and exit lower-margin businesses.