Nation develops its sweet tooth

According to the International Sugar Organization in London, China is among the world's 10 biggest sugar-producing countries, with annual output pegged at 10 million metric tons. But local production can barely cope with increasing demand.

The Ministry of Agriculture and Rural Affairs expects domestic sugar output to rise by 4.2 percent year-on-year to 10.68 million tons from October last year to September this year, according to a Xinhua News Agency report.

Sugar imports during this period are expected to reach 3.2 million tons, the same as a year earlier, while exports are expected to rise by 30,000 tons to 150,000 tons.

China's sugar imports, even though unchanged from the previous year, are still seen as a supportive factor in a market recovering from last year's historic lows.

Last year, raw sugar futures traded on the Intercontinental Exchange fell to a 10-year low of 10 cents a pound (0.45 kilograms), pressured by bumper crops in key exporters Thailand and India. The health-and-wellness trend has also dampened sugar demand in Australia, the United States and Europe.

Prices have recovered slightly this year, with raw sugar futures trading at 12 to 13 cents per pound on the exchange in the first week of last month.

Asian sugar exporters are embracing the opportunities offered by the Chinese market. For example, Pakistan will export 300,000 tons of sugar to China this year, based on an arrangement reached by the two countries' governments, according to media reports.

In India, the Ministry of Commerce said the Indian Sugar Mills Association has sealed a contract with China National Cereals, Oils and Foodstuffs Corp to export 15,000 tons of raw sugar. The ministry also said in a statement that India plans to export 2 million tons of raw sugar to China this year.

In late April, MSM Malaysia Holdings, one of the world's biggest sugar refineries, shipped 7,000 tons of sugar to China. In a statement issued on April 26, the Kuala Lumpur company said it was its first shipment to the country.

Khairil Anuar Aziz, MSM Group CEO, said the company is also setting up partnerships in China's downstream sugar industry, according to a Bloomberg report.

John Stansfield, senior analyst at Group Sopex, a sugar trading house in London, said, "China is a key factor for the sugar market in 2019."

He said the country's crackdown on the smuggling of refined sugar will encourage raw imports of the commodity to be refined domestically. This, in turn, will support the global trade in raw sugar.

But such support could be limited, at least in the near term. Analysts note that a huge sugar surplus remains in the global market, with China holding a big inventory. The US Department of Agriculture estimates that China has more than 5 million tons in its reserves.

Stansfield said that overall Chinese sugar import demand is likely to remain restricted, as there are still very large reserves that can be released on to the domestic market.