Sugar Imports by China May Jump 42% as Demand Exceeds Supply, Survey Shows

Raw-sugar imports by China, the third-largest producer, may surge by as much as 42 percent in 2010 after domestic output dropped for a second straight year and demand increased, according to a survey. 

Purchases may reach 1.5 million metric tons compared with 1.06 million in 2009, three of five China-based analysts and traders said last week. Imports may be at least 1 million tons, with amounts above that level determined by demand, the other two said. A total of 1.5 million tons would be the highest since at least 2005, according to customs data compiled by Bloomberg. 

Increased purchases by China may help futures extend a 54 percent surge since May that’s been driven by stronger global demand and damage to crops in Indonesia and Pakistan. China’s government has been selling sugar from state stockpiles at a record rate this year to plug a shortfall, according to Gao Wang at Beijing Orient Agribusiness Consultant Co. 

“China is likely to step into the market when the sugar price declines, not at the current level,” said Piromsak Sasunee, chief executive officer at Thai Sugar Trading Corp., the country’s largest exporter. “Purchases will help support the market,” Piromsak, who didn’t participate in the survey, said from Bangkok today. Thailand is Asia’s largest shipper. 

Raw sugar for October delivery on ICE Futures U.S. in New York closed at 19.96 cents per pound on Aug. 27 after touching a high of 20.32 cents on concern that dry weather may hurt output in Brazil, the largest grower. The most-active contract dropped to 13 cents in intraday trading on May 7. 

‘Makes No Sense’ 

“The state reserve will want to gauge China’s own crop size before they make plans for overseas purchases,” said Gao, the Beijing Orient analyst, forecasting shipments of 1 million to 1.5 million tons in the survey. “It makes no sense for China to buy when New York sugar prices are above 20 cents.” 

Jonathan Kingsman, managing director of researcher and broker Kingsman SA, said on Aug. 21 that China’s state sales had “used most of its reserves.” The nation may start buying again to rebuild its holdings, Kingsman said. 

Refined sugar on China’s Zhengzhou Commodity Exchange gained 17 percent from the year’s low on May 18 and the close on Aug. 27. The most actively traded contract for May delivery was at 5,454 yuan ($802) per ton at 10:11 a.m. local time today. Prices have climbed even amid the state stockpile auctions. 

Smaller Harvests 

Raw-sugar output in China fell 16 percent to 13.3 million tons in 2008-2009, and declined further to 11.6 million tons in 2009-2010, according to the U.S. Department of Agriculture, after drought and a fall in acreage. Demand this year may be 14.9 million tons, according to the USDA. 

China’s 2010-2011 sugar crop may gain 2 million tons to 12.5 million tons, the first increase in two years, said Song Lu, an analyst at Dongwu Futures Co., who forecast imports of 1.5 million tons in the survey. 

Sugar demand has been rising in the world’s most populous nation on increased sales of cakes and drinks. The food- manufacturing industry grew 15.7 percent in the first seven months of 2010 in terms of industrial value-added, according to the National Statistics Bureau. The beverage industry grew 13.6 percent in the same period compared with a year ago, it said. 

Imports between January and July were 716,000 tons, 17 percent less than in the same period last year, according to customs data. Still, July’s shipments were more than twice the amount a year earlier at a record 305,781 tons, the data showed. The top three suppliers are Brazil, Cuba and South Korea. 

State Selling 

The government sold about 1.47 million tons from state stockpiles in seven auctions in the year to Sept. 30, according to data compiled by Bloomberg. Beijing Orient’s Gao said that volume may be a record, and estimated that more than 1 million tons of raw sugar remain in government warehouses. 

At the latest auction, held Aug. 12, all the 150,000 tons on offer were sold at an average price of 5,417.73 yuan a ton, about 170 yuan per ton more than in the previous auction in July. 

The survey respondents also included Liu Qingli, an analyst at GF Futures Co. in Guangzhou; Xi Datong, chief representative at Bunge London Ltd. in Beijing, who gave a personal view; and Tang Fenglei, an analyst at Zheshang Futures Co. in Hangzhou. Source: Bloomberg