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The global spread of the coronavirus continues to cause worries about the global economic development.
Guangxi mills have closed down at a much faster pace and confirmed the reduction in their 19/20 sugar production forecast, reducing domestic supply pressure.
The smuggling margin has picked up since mid-February, but this year’s smuggling volume is estimated to go down due to impact of the epidemic.

Market News Update

Sugar Prices

Due to the extended impact of the epidemic and the off-season of consumption, the overall spot price fell in the last week.
As of Friday, the mainstream price range in Guangxi was 5740-5830 yuan / ton, and Kunming was 5740 yuan / ton; the average spot premium in Guangxi exceeded 100 yuan / ton.
The overall commodity market fell last week. ZCE sugar prices also fell and closed at 5664 yuan / ton on Friday, down 110 yuan from the previous week, a decrease of 1.9%.
Raw sugar futures also fell sharply and closed at 14.2 cents / lb on Friday, down 0.92 cents / lb week-on-week, or 6%.

Mills Closing Down At Fast Pace

As of 29^th February, 37 sugar mills closed down in Guangxi, up from 35 year-on-year.
Despite the impact of the coronavirus outbreak, Guangxi is expected to finish crushing at the end of March.
Due to the record sucrose yields, our estimate remains at 6m tonnes for Guangxi’s sugar production.
In the 20/21 season, Guangxi plans to plant 3.85m acres of new canes, currently at 34.3% completion. In addition, under the influence of this year’s epidemic, fruits such as the tangerine were causing
farmer losses. Some farmers may switch to sugarcane due to the lower risk. We still need to pay attention to the weather this year.

The Smuggling Margin Goes Lower

With the rising white sugar price and the cost of smuggling increasing, the smuggling margin dropped to $100/mt in February.
With the spread of the epidemic, global financial markets are suffering heavy pressure and sugar prices are no exception; while domestic sugar prices are relatively stable, smuggling profits have picked up recently.
Considering the inconvenience of transportation and the prevention and control of the epidemic, the actual risk of smuggling is higher and the driving force for smuggling profits is insufficient.

Rosa Li

Rosa graduated from Jinan University in 2012 with a bachelor’s degree in Marketing. Rosa joined CZ in 2014 and has been an analyst for 7 years in our Guangzhou office managing the data capture, analysis and visualisation within the Chinese sugar markets utilising her skills in SQL, Python and VBA while also providing content for our platform CZ App. Rosa is also responsible for the localization of CZ App in China – CZ App WeChat, she also assists with the commercial marketing in China and works towards strategy with the trading team.