484 words / 3 minute reading time

Since 2014, shipments of Thai raw sugar to Japan have been displaced by flows from Australia.
This follows a change in Japanese import rules in 2016.
Take a closer look at our Global Shipments data using Czapp’s Interactive Data section.

Japan Switching to Australia

Shipments of raw sugar from Thailand to Japan have been gradually decreasing.
In 2014, 760k tonnes wereshipped compared to 200k tonnes in 2019.
This represents at 75% decline over five years.

Thailand to Japan Raw Shipments

Meanwhile, flows from Australia to Japan have been increasing each year.
The flow has more than doubled over the same five-year period.

Australia to Japan Raw Shipments

However, when combining shipments from both origins we can see that imports into Japan have not really changed.

Total Japanese Raw Imports

What Is Driving The Change?

Japan only produces enough sugar domestically to cover 30% of its yearly demand.
Production is relatively similar each year whilst total consumption is falling by around 1% per year.

Japanese Production and Consumption Not Changing

As such, consumption exceeds domestic production by about 1.3m tonnes each year.
To fill this deficit, raw sugar for local refining is imported via a quota system.

Japanese Deficit

These imports are subject to a maximum polarisation (quality) to protect the domestic sugar industry.
Sugar that meets this requirement is often referred to as J-Spec.
In 2016, the restrictions for Australian (J-Spec) sugar were relaxed following the Japan-Australia Economic Partnership Agreement (EPA) agreement.

Polarisation of Several Qualities of Raw Sugar

Due to the higher quality of Australian sugar, it is cheaper to refine as fewer impurities need to be removed.
In addition, Australia has been granted a 1,500 JPY/mt (13.5 USD/mt) duty reduction.
This means that Australian sugar represents a significant saving over Thais, despite a $7/tonne freight disadvantage.

For Analysis Nerds: More on Polarisation and the Regulations

All sugar imports to Japan must be maximum of 97.99 pol, other than those from Australia, which since 2016, can have a maximum of 98.99 degrees.
Polarisation is a measure of the concentration of sugar in a solution and is measured by its effect on the polarisation of light through solution.
This means that refineries have to allocate more of their import quota per tonne for Australian sugar creating an effective higher duty.
However, this is offset by the 1,500 JPY/mt (13.5 USD/mt) duty reduction and the reduced refining costs.
Refining costs are reduced as more sugar can be extracted per tonne of processing. Also, there are fewer impurities so refinery downtime for maintenance is reduced.

Ben Seed

Ben joined CZ’s analysis team in 2016 on a year long internship before returning to the University of Bath to complete an Economics Degree. Since re-joining in August 2018, Ben has led the data insights team in expanding the range and quality of data available internally and to clients through CZ App. Ben spent 3 months in CZ’s Singapore and Bangkok offices to expand his knowledge of the region and help roll out the latest data processes. He is now also responsible for the Sugar Market View published each week on CZ App.