Saturday, August 19, 2017

Sugar traders ordered to balance inventory amid glut

Banned sugar re-exporters must balance their inventories by month-end, according to a letter from the Directorate of Trade, one sugar trader told The Myanmar Times.

Workers harvest sugarcane at Kyimyindaing. There is currently an oversupply of sugar in Myanmar. The Myanmar TimesWorkers harvest sugarcane at Kyimyindaing. There is currently an oversupply of sugar in Myanmar. The Myanmar Times

The order comes amid an oversupply of sugar in Myanmar and collapse in the price of sugar bound for China, from over US$700 per tonne in 2016 to just over US$560 per tonne currently.

Since 2015, China has been one of the largest buyers of sugar from Myanmar. To meet the huge demand, hundreds of sugar traders in Myanmar were issued with licenses to import sugar and re-export the commodity to China.

In 2016, with the price of sugar in China almost double that of the market price, Myanmar’s sugar traders imported 1.7 million tonnes of sugar in 2015-16 for re-export purposes, about 20 times the volume imported in 2014-15.

But not all the imported sugar has been re-exported and since the beginning of this year, demand from China has tapered. As a result, sugar prices have declined sharply to around US$563 per tonne.

That has left many traders who imported sugar when prices were higher in the lurch. It has also contributed to a ballooning sugar glut in the country, which, in turn, is causing prices to decline further.

Now, the authorities are stepping up efforts to place a floor under declining sugar prices. Since 2015, a total of 56 sugar companies with the license to re-export have been banned from doing so. They comprise 34 importers which did not re-export any sugar and 22 which exported less than they imported, resulting in a huge pile-up of sugar targeted for re-exports in Myanmar.

These companies are now being called to task. “Even a small discrepancy in the number of tonnes [between import and export] is unacceptable. They must balance their inventories even though the sugar business is not profitable now,” said U Win Htay, managing director of La Min Tha Zin Co. Ltd.

Sugar is one of the sectors promoted by the Myanmar Investment Commission in its April 1 circular.