WINNIPEG, Manitoba (Reuters) - A Canadian company better known for selling condominiums has walked into a C$1 billion ($890 million) deal to ship edible oil to China as consumer demand there overtakes domestic supplies.
Fengguan Edible Oil Ltd Co, a Chinese producer of oil from rapeseed, contacted Toronto-based LeMine Investment Group this year about securing canola oil, a variant of rapeseed that is crushed for cooking, salad dressings and margarine.
This month, LeMine, which had been referred to Fengguan by a third party, signed a seven-year agreement during Prime Minister Stephen Harper’s visit to China, even though the Canadian company has not yet secured supplies.
The deal will eventually put canola oil exported by LeMine into Chinese outlets owned by Wal-Mart Stores Inc, which sell rapeseed oil under the Fengguan brand, said LeMine Chief Executive Officer Thomas Liu.
“China (produces) rapeseed oil, and production every year is ... not enough,” Liu said in a telephone interview from Toronto. “It is a popular edible oil in China already.”
A Wal-Mart spokeswoman could not immediately confirm its relationship with Fengguan.
LeMine builds condos and is also involved in equity investments and legal and immigration services. Its international trade division has already exported Canadian cherries and blueberries to China.
LeMine’s export deal surprised some in Canada. Industry group Canola Council of Canada welcomed it, but was not familiar with LeMine’s plans.
Liu said LeMine is negotiating supplies with several Canadian canola crushing plants, declining to name them because the agreements were not finalized.
LeMine plans to ship 200 tonnes of bulk refined canola oil to China in December, followed by a larger shipment in February. Initially, bottling and labeling will be done in China, but that work will eventually take place in Canada, Liu said.
Companies with Canadian canola-crushing operations include Bunge Ltd, Archer Daniels Midland Co, Richardson International, Cargill Ltd, Viterra Inc, TRT-ETGO and Louis Dreyfus Corp.
Canada shipped 885,000 tonnes of canola oil to China in 2013, making it the second-largest export market after the United States, according to Statistics Canada.
LeMine is also in the early stages of planning its own canola-crushing plant, possibly with a partner, in the Western Canadian province of Saskatchewan, Liu added.
Reporting by Rod Nickel in Winnipeg, Manitoba. Editing by Andre Grenon