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May 23, 2017

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China slaps 3-year duties on sugar imports

THE Ministry of Commerce yesterday announced the final ruling on an investigation into sugar imports, deciding to begin three-year duty on out-of-quota shipments to protect the domestic industry.

But experts said the ruling may not go far enough to stem the flow of lower-priced sweetener into the world’s top importer.

China now allows 1.95 million tons of imports at a tariff of 15 percent as part of its commitment to the World Trade Organization.

Imports beyond this attract a 50 percent levy.

Yesterday’s ruling will add an extra 45 percent duty to these imports from yesterday to May 21, 2018, the ministry said in a statement. The duty will be reduced to 40 percent, then 35 percent in each subsequent year, according to the statement.

The investigation, launched last year in response to pleas by the domestic industry, found that increasing imports were causing serious harm to local producers.

WTO members may take measures to protect their domestic industries from any increase in imports which causes, or threatens to cause, serious problems for local producers.

The move could dent imports from top growers such as Brazil and Thailand as it will close the big gap between Chinese and international prices. Chinese sugar prices are around double those on the London market.

But traders said the higher tariffs will also likely spur increased smuggling across China’s porous southern border, while some imports from major producers may be shipped through third-party nations excluded from the tariffs.

Sugar is one of the few sectors in which China struggles to compete given the higher costs of its smallholder farmers, who produce about 10.5 million tons of cane and beet sugar a year.

The country imports another 3 million tons of the sweetener a year, while China has been trying to crack down on illegal shipments of as much as 2 million tons a year, sources have said.

“While smuggling has temporarily slowed, there is a risk that the incentives for smuggling are still strong and in fact could increase if domestic prices rise,” said Tom McNeill, director of Green Pool Commodities in Brisbane.

The latest ruling exempted about 190 smaller countries and regions from the new duty, including smaller producers such as the Philippines and Pakistan as well as Myanmar on its southern border.

“Of course it will support the domestic industry for a short time,” said a China-based trader. But “the global raw sugar market just needs to drop a little below 15 cents” to make it profitable to import into China.

The measures, which will affect about a third of China’s annual sugar imports, may also increase pressure on Beijing to sell more of its state reserves to prevent supplies tightening and prices spiking.

Last year, China imported 3.06 million tons of sugar, down 36.8 percent from 2015.

Thailand, the world’s third-largest producer, played down the impact of the duty.

Its millers have a much lower shipping cost to China than rivals Brazil and Australia, said Viboon Panitwong, chairman of the Thai Sugar Millers Corp, who did not expect the duty to sharply affect sugar exports.

Thailand exports 300,000 tons to 400,000 tons of sugar to China a year, but sells much more to Cambodia and Myanmar, which then re-export sweetener to other countries.


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