PUBLISHED ONOctober 26, 2015 7:06 AM
China's sugar demand looks to hold steady this year, with lower prices giving corn-based additives a growing advantage in the sweeteners market, said an association official.
Sugar consumption by the world's second largest user may hold near last year's level of around 16 million tonnes, Liu Hande, deputy secretary general of the China Sugar Association told a conference in Zhengzhou on Saturday. "The main reason is corn prices are relatively low. Next year (corn) substitution (for sugar) will be quite noticeable,"said Liu.
Chinese corn prices are under pressure from a bumper harvest as well as lower prices being paid by the state stockpiler this year.
Local governments in major corn-growing regions are also offering subsidies to industrial users to help them purchase corn, a move that could help sweetener makers step up their output after years of recording losses. "We have heard that some beverage companies are considering switching," said Han Xu, vice president of futures research at Cofco Futures, adding that the extent of any switching would not be seen until the second quarter of 2016. "White sugar demand won't grow and could decline," she said.
Demand has already weakened in 2014/15, with the association recently reporting sugar sales down almost 16 per cent from the previous year to 9.6 million tonnes, impacted by relatively cool summer weather and a slowing economy.
Analysts say Chinese consumers are also buying less sugary drinks as health concerns grow among the middle class.
Weak demand could pressure domestic sugar prices, reducing the margin on less expensive overseas sugar and denting demand for imports that have surged in recent months.
Chinese imports are up 55 per cent in the first nine months of the year compared with the same period a year ago to 3.79 million tonnes.
Government policy on imports and any rise in international prices could also curb next year's shipment volumes, said Liu.
More than half of September's shipments are being stored in bonded warehouses as buyers await new permits to be released next year. Beijing has used a new registration system to control imports since last November.
Most of the October through December arrivals - estimated at about 200,000-300,000 tonnes per month - will also go into bonded zones, Liu said.
Sugar imports could be as low as 4.5 million tonnes in 2015/16, slightly down on last year, despite an expected 10 per cent decline in domestic output to 9.5 million tonnes, he said.