Singapore — Thai sugar cash premiums for next season rose Tuesday after the announcement by China that it will be imposing a uniform 90% out-of-quota import duty from August.
"The import duty change from China will be bullish for Thai cash values for next season," a trader said.
S&P Global Platts assessed Thai HiPol cash premiums for both March-May 2019 and May-July 2019 up 7 points Tuesday at 52 points over New York No. 11 March and May, respectively.
The Chinese Ministry of Commerce announced Monday it will be imposing a uniform 90% import duty on OOQ sugar imports starting August 1 and that it will be abolishing the duty exemptions given to developing countries exporting less than 3% of total Chinese sugar imports.
China currently imposes a 50% import duty on OOQ sugar imports from developing countries such as El Salvador, Nicaragua, Costa Rica and Honduras. Whereas OOQ imports into China from major exporters such as Thailand, Brazil and Guatemala face a 90% import duty. China also has an in-quota sugar import policy, with a 15% import duty.
During the 2017-18 (October-September) season, 1.07 million mt of Chinese sugar imports are expected to be in-quota and about 2.7 million mt OOQ, S&P Global Platts Analytics data showed.
The preferential import duty for developing countries resulted in exports from these origins into China being more competitive. Raw sugar exports from the Central American countries such as El Salvador and Nicaragua to China during January-June are already at 354,000 mt, more than double the 126,274 mt in the whole of 2017, Platts Analytics data showed.
"With exports from Central American countries increasing a lot this year, some people were expecting China to remove those countries from the preferential duty list but not discontinue it altogether," a market source said.
The uniform duty on OOQ imports will benefit Thailand as it enjoys a freight advantage for sugar exports into China compared with those from Brazil or Central America.
S&P Global Platts assessed the value for August loading VHP sugar from Center-South Brazil at 11.06 cents/lb 126,274 mt and for Thai HiPol sugar for August loading at 10.89 cents/lb ($240/mt) on Monday. The landed cost of sugar in China from Brazil is around $282/mt and from Thailand at around $252/mt, with freight for a Supramax assessed by Platts at $37.75/mt on the Brazil-China route and on the Thailand-China route estimated at $12/mt.
"Sugar exports to China from the Central American countries will be priced out against Thailand due to cheaper freight from Thailand, even with a $5/mt quality premium for Central Americans since the freight spread is about $22-$24/mt," a trader said.
For the 2018-19 season, in-quota sugar imports into China are expected to be 1.2 million mt and OOQ at 2.87 million mt, Platts Analytics estimated. The uniform duty ON OOQ sugar imports into China will level the playing field and is likely to increase exports out of Thailand next season, market sources said.
