The price of sugar in China will stay high in the second half of 2017

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Publish time: 13th July, 2017      Source: CCM
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  China's sugar price remains high in 2017 despite the opposite international trend. The government is going to protect the domestic industry with higher tariffs and increasing efforts in fighting the large sugar smuggling.

  

   

  Source: Pixabay

  

  China's sugar price underwent a significant growth from 2016 to 2017. The main reasons have been a decrease in the planting area of sugarcane as well as heavy weather occurrences, which damaged the quality of sugarcane, decreasing the supply and hence boosting the price for sugar from China.  

  

  The production in the 2016/2017 extracting season revealed a growth by 6.8% compared to the last season, but the result stays behind estimations. Since also the import volume of sugar did not reach the estimated numbers and the demand for sugar remains the same, China will face a larger sugar supply shortage in this extracting season than it was the case in the previous one.  

  

  This greater sugar supply shortage is the main reason for the sugar price to stay high in the second half of 2017. According to market intelligence firm CCM.the price for sugar in June was in average USD8 per tonne higher than in the same month 2016. The sugar price is likely to remain on this high level and not going up again since China is following a price stabilisation policy in this season, which would result in higher sugar reserves to push the price down once it is getting up.  

  

  China's sugar price in Jan. 2015 – May 2017

   

  Source: CCM  

  

  China's sugar industry is also looking forward to proposed heavy import tariffs on sugar, charging up to a 95% duty for out-of-quota imports, which will benefit the domestic manufacturers enormously. The new tariff would especially relieve the large amount of China's small farmers, which are constantly getting faced by the pressure of cheap sugar imports from top producers from Brazil or Thailand. After all, China's sugar industry has a low concentration with a large number if enterprises. 

  

  Furthermore, China is strengthening the effort to cut down the illegal sugar smuggling, which especially occurs to the borders of southern neighbours like Myanmar. According to experts' estimation, the yearly sugar smuggling to China reaches up to 2 million tonnes. The smuggling is mainly caused by the huge difference of China's and international sugar price. The international price is even further dropping down to 13.5 cents per pound recently, while China's domestic sugar is remaining on a high price level.  

  

  In the meanwhile, the largest sugar exporter globally, Brazil, has revealed a declined sugar production compared to previous years. The sugar price in the country fell down by 30% in 2016, which discouraged manufacturers to produce a large amount of sugar. Especially small producers are suffering under the low sugar price.  

  

  China is the largest importer of sugar worldwide. The annual growth rate of sugar in China has been 1.9% from 2011 to 2016. The boosting demand is caused by rising consumer incomes in China's growing middle class. Despite some price fluctuations for sugar in China, the demand is growing steadily.  

  

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  CCM is the leading market intelligence provider for China's agriculture, chemicals, food & ingredients and life science markets.  

  

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