• China’s sugar mills have struggled to make sales this season.
  • They had 653k tonnes of white sugar in stock at the end of June.
  • With this, China’s stocks were at their second highest level since 2013/14.

Second Highest White Sugar Stocks On Record

  • China’s white sugar stocks are the largest they’ve been since 2013/14, when it produced a record amount of sugar (13.3mmt).
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  • The mills have struggled to make sales this season, with many consumers buying directly from the refineries, due to the increased freight costs from Guangxi.
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  • The Ministry of Commerce (MOC) delayed the issuance of import quotas/licenses to refineries until late April, in hope that the mills could shift their sugar.
    • The majority of the refineries only use imported raws to produce refined sugar, whilst the mills use cane or beet to produce white sugar; the two are in competition with one another.
  • The delay was supposed to protect domestic sugar industry by ensuring the mills were the main supplier before they started crushing in June.
  • This wasn’t the case, though, as the mills were unwilling to make discounted sales.
  • They’ve sold around 6.7m tonnes of sugar to date, down 402k tonnes year-on-year.
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What Does This Mean for China?

  • High stocks meant physical premiums fell from 429 RMB/mt to 0 in the first three months of 2020/21.
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  • They also suppressed ZCE white sugar futures, which in turn weakened the raw sugar import margin.
  • With this, the refineries won’t likely import raw sugar until import margins are in positive territory.
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  • They currently have less than 1m tonnes of demand left to cover (out of their yearly 4.5mmt demand).
  • We still think they’ll try to fully utilise their Automatic Import Licenses this year, but if imports remain unviable, they could hold off until the last minute.
  • If the No.11 moves towards the bottom of the range (16-17c), China should still import 4.5m tonnes of raws, marking its second-largest year of imports on record (after 2020).
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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.

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