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Balance of sugar supply-demand in Vietnam in 2010
29 | 01 | 2010
In 2009, total sugar consumption in Vietnam was estimated at 1.45 million tons, which indicated a year-on-year rise of roughly 4.3% in sugar demand in comparison with 1.225 million tons consumed in 2005. Of this figure, more than 73% was used by the processing industry: soft drinks, confectionery, pharmaceuticals and nearly 27% was directly taken in homes.

In 2009, total sugar consumption in Vietnam was estimated at 1.45 million tons, which indicated a year-on-year rise of roughly 4.3% in sugar demand in comparison with 1.225 million tons consumed in 2005. Of this figure, more than 73% was used by the processing industry: soft drinks, confectionery, pharmaceuticals and nearly 27% was directly taken in homes. Along with increasing demand for domestic consumption, Vietnam’s processing industries are forecast to see a surge in sugar intake between now and 2013 by the International Business Mornitor. Confectionery industry is expected to see a rate of about 28%; canned foods about 37%. An enormous growth is also expected for the beverage industry in the same period. Thus, Vietnam's sugar needs will increase over 4.5%/year in years to come. Accordingly, the total consumption of sugar in Vietnam is predicted at 1.51 million tonnes by 2010.

As reported by the Ministry of Agriculture and Rural Development, in the 2008/2009 crop year, there were 40 sugar mills in place. Except for some foreign-invested joint ventures which were better equipped with modern technology, most of the mills used backward technology, which resulted in an average capacity of only 2643.75 tonnes of cane sugar per day while a minimum capacity of around 6000-7000 tonnes of cane sugar per day is globally a must for a sugar mill to achieve economic efficiency. Moreover, according to the General Statistics Office, sugarcane areas in Vietnam have seemed to trend downward over the past 5 years, from 302.3 thousand ha in 1999/2000 down to 286.1 thousand ha in 2003/2004 and about 271.1 thousand ha in 2008/2009. Although current sugarcane yields in Vietnam have been improved thanks to advanced technology and sound investments in raw material-growing regions, sugar productivity in Vietnam remains below 50 tonnes/ha as opposed to 70-100 tonnes/ha recorded in many other countries worldwide. These factors have reduced cane sugar yields and negatively impacted on its output, price and quality. However, even if all the mills were provided with sufficient raw materials and their capacity was maximized, with a total designed capacity of approximately 105,750 tonnes of cane sugar per day as it is now, Vietnam was able to produce merely about 1 million tons of sugar.



Source:AGROINFO

Hence, compared to 1.51 million tonnes to be demanded in 2010, the amount of domestically-produced sugar and inventories (about 100 thousand tonnes) will be able to satisfy just less than 75% of the needs and the market will still see a considerable shortage, some 410 thousand tonnes.
Tackling the shortage?

According to WTO commitments, at the time of Vietnam’s accession to WTO (2007), import quotas on raw sugar and refined sugar were set at 55,000 tonnes, which would increase 5% on a year-on-year basis. Quota-bound import tax was 25% for raw sugar; 60% for refined cane sugar; and 50% for refined beet sugar. Quota-free imports were not limited in terms of import regulations, yet they were susceptible to a very high tax rate, from 80% -100%. According to CEPT/AFTA commitments for the 2009-2013 period, import duties imposed on all types of sugar will be 5% from 2010 onwards. So, this year, sugar imports from ASEAN countries are about to be taxed lower than those from other countries.

Recently, Vietnam has imported sugar mostly from Thailand and China. However, according to a forecast of the China Sugar Association, sugar production of the country will reduce in the 2009/2010 crop year as the result of contracted areas planted to sugarcanes and beets. Chinese sugar prices are currently fluctuating at US$ 765/tonne and the country has reluctantly sold about 500,000 tonnes of sugar from its stockpiles after a sharp hike of domestic sugar prices in recent months. In Thailand, the largest sugar producer in ASEAN and the world second largest sugar exporter, its sugar output is predicted to reach 8 million tonnes and sugar exports are expected at 5.64 million tonnes in 2010. On the other hand, Thai sugar prices have been hovering at US$ 650/tonne only, and if the sugar is imported in accordance with quotas, added by 5% of import tax, the prices of Thai sugar will remain lower than domestic prices. So, taking advantage of price, supply and transportation costs, Thai sugar will outperform in the process of penetration into Vietnam market.

Therefore, in 2010, if the production and purchase structure of sugar mills remain unimproved, a sugar shortage occurs and domestic sugar prices are still higher than the world’s as they are now, it is very likely that sugar prices will keep rising. Looking back at movements of the sugar market in 2009, the escalation of domestic sugar prices was mainly because sugar imports and supplies failed to keep up with market movements, which led to short-term sugar fevers.

In 2010, the sugar industry must closely follow any movements of the world sugar market and take initiative in imports and timely respond to market needs in order to prevent visual sugar scarcity. These measures in combination with good management of domestic production and purchases of raw sugarcanes of sugar mills will be the best solutions to stabilize the sugar market in 2010.



Do Van Hao/AGROINFO
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