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Sugar producers worried as inventory remains high

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Sugar companies have once again shouted for help as the volume of inventory is increasing rapidly, while the domestic market is flooded with smuggled sugar.

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The inventory of the new crop had reached 680,273 tons

According to the Vietnam Sugar & Sugarcane Association (VSSA), besides the big volume from the 2016-2017 crop, the inventory of the new crop had reached 680,273 tons as of April 15, while inventory at trading companies had reached 12.281 tons.  The inventory volume now accounts for half of the total sugar output from the beginning of the crop to mid-April.

The figure is nearly equal to the inventory level of the same period last year (717,000 tons by the end of April 2017). The inventory volume of 700,000 tons is ‘normal’ in developed countries, but it is a big problem in Vietnam, where sugar companies suffer the most. Meanwhile, the sugar price has been decreasing in both domestic and world markets.

Some sugar refineries have had to sell products at prices nearly equal to the prices of smuggled sugar. Some others have accepted to sell sugar below product costs to reduce the inventory volume (VND11,400-12,000 per kilogram).

Some sugar refineries have had to sell products at prices nearly equal to the prices of smuggled sugar. Some others have accepted to sell sugar below product costs to reduce the inventory volume (VND11,400-12,000 per kilogram).

VSSA’s Ha Huu Phai said the price decrease fell to a 4-year low in the world market because of the record high output of 178 million tons, or 10 million tons higher than last year. However, the low demand and price decrease are just some of the problems faced by Vietnam’s sugar industry.

For many years, manufacturers have had to struggle to exist because refineries have a small scale, limited sugarcane growing areas, low productivity and low quality. Sugar smuggling has also dealt a strong blow to domestic manufacturers.

Phai said Thailand this year produces 12 million of sugar, up by 2 million tons over the last crop. The sugar has been smuggled to neighboring countries including China, Vietnam, Cambodia, Laos and Myanmar. In fact, smuggled sugar is not only from Thailand. Many businesspeople registered to import sugar for re-export later, but they sold imports domestically.

Besides smuggled sugar, domestic products also have to compete with HFCS - High-Fructose Corn Syrup. China, South Korea and Thailand alone export 80 percent of Vietnam’s total HFSC Vietnam at the tariff of zero percent. Chinese HFSC has a tax rate of 13 percent.

However, Chinese businesses bring HFSC to ASEAN countries before shipping to Vietnam to avoid tax. Vietnam imposes zero tariff on imports from ASEAN. According to the General Statistics Office (GSO), 70,090 tons of HFSC came to Vietnam in 2016 and 89,434 tons in 2017. 

Kim Chi

Source: VietNamNet

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