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Unable to sell sugar, refineries halt operation
The sugar price has decreased continuously for the past two weeks. Traders dare not store goods and sugar refineries cannot sell products, but they need money to collect sugar cane and pay bank loan interest rates. A lot of refineries have been running at moderate levels or have halted operation.
Sugar unsellable
The wholesale sugar price dropped to 17,000 dong per kilo on March 27, a decrease of 17-20 percent in comparison with the price two months ago. Meanwhile, the retail price has plunged from 25,000 dong before Tet to 20,000-22,000 dong per kilo.
Representatives of sugar refineries said though the prices are decreasing, it is very difficult to sell sugar now. Meanwhile, refineries need money to collect sugar cane to serve production.
“We need 3.5 billion dong a day to buy sugar cane. As we need money urgently, we have slashed the wholesale price to 17,500 dong per kilo, but there are no buyers,” said Trinh Minh Chau, General Director of Soc Trang Sugar Refinery.
According to Chau, every year his refinery has a “quota” of borrowing 130 billion dong from banks. However, the sum of capital is just enough to make 1/3 of the sugar output (35,000 tons). Therefore, the refinery has to sell sugar while pressing sugar cane in order to get money. “Now as sugar is unsellable and banks have not disbursed money, we are facing serious difficulties,” he complained.
Nguyen Thanh Long, Chair of the Vietnam Sugar Association, who is also the General Director of Can Tho Sugar Refinery, said on March 27 that two refineries, Ca Mau and Kien Giang, have halted operation because they have no more money to collect sugar cane. The Ben Tre Sugar Refinery has been operating at a moderate level, and it may halt operation in one week. Meanwhile, only 70 percent of the total sugar cane output in Mekong Delta has been pressed.
Long said the association will sent a document to the government, asking the government to instruct commercial banks to lend more money to sugar refineries, so that they have money to buy sugar cane.
Speculators are not speculating at this moment
In late 2010, though it was the main production season, the retail sugar price still escalated, once climbing to 25,000-27,000 dong per kilo. The price increase was blamed on the world’s price increase (800-850 dollars per ton) and on domestic speculation. As such, speculators are believed to play a very important role in the sugar pricing. However, speculators remain quiet at this moment. They do not intend to store products now, when the price keeps decreasing.
Ha Huu Phai, Secretary General of the Vietnam Sugar Association, said there are many reasons that speculators ran away. First, the sugar price in the world has been decreasing sharply since the beginning of March, from 850 dollars per tone to 700 dollars per ton, due to the bountiful crop in Thailand. The downward tendency has been anticipated for the upcoming month, and will actually take place if the sugar output in Brazil is as high as forecast.
“Speculators dare not to store sugar at this moment. As the interest rate is too high, they would have to pay an interest of 300 dong for every kilo of sugar in stocks if they store goods now,” Phai said. Meanwhile, the demand for sugar has decreased as it is now not the sweets production season.
Currently, the smuggled imports from Thailand have prices lower by 200-500 dong per kilo than the wholesale prices offered by domestic refineries. As the sugar price once increased too sharply, refineries had to buy sugar cane at high prices, at 1500 dong per kilo. Therefore, if the sugar price drops to below 17,000 dong per kilo, refineries will incur losses.
vietnamnet
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