Sugar firms face bitter competition in region

18:02 | 19/05/2015 Trade

Sugar firms are now resorting to diverse means to grow more sustainably amid a currently tough business climate.

Sugar firms face bitter competition in region

According to the Ministry of Agriculture and Rural Development’s Department for Agro-forestry-fishery Processing and Salt Industry, as of mid-April this year stockpiled volumes at sugar factories have surpassed 560,000 tonnes.

Meanwhile, sugar export is heavily dependent on the Chinese market, and local businesses have to compete with lower-cost products from Thailand and India.

“Low-cost sugar from Thailand has caused serious headaches for local sugar firms, which are well-protected in Thailand. They can sell redundant sugar volumes cheaply through cross-border transactions,” said Nguyen Hai, general secretary of Vietnam Sugar Association.

“The sugar price hovers around VND8,000 (US37 cents) per kg at Thai factories,” Hai added.

Meanwhile, in Vietnam, first grade sugar currently fetches around VND12,000-VND12,200 (56cents) per kg.

As a result of declining profits from growing sugar cane, many farmers have shifted into growing other more profitable crops, leading to a reduction of 9,400ha in sugar cane growing areas in the 2014-2015 season which will put pressure on domestic supply sources.

Recently, the prime minister has allowed multi-field group Hoang Anh Gia Lai to import 50,000 tonnes of lower-cost sugar from Laos with 2.5% import duty, a move which was viewed by industry experts as a ‘test’ to the local sugar industry, forcing firms to exercise measures to boost competitiveness through bettering product quality and saving cost.

In this context, sugar firms have resorted to wide-ranging measures to remain competitive in the market.

The mid-term financial statements of many sugar firms show that firms have ramped up efforts to reduce stockpiles to limit rising expenses.

For example, Ninh Hoa Sugar (NHS), based in the south-central coastal province of Khanh Hoa, had reduced their stockpile value by 85% to just VND 54 billion (USS$2.5 million) against the end of June 2014.

Similarly, Bien Hoa Sugar (BHS), based in the southern province of Dong Nai, reduced their stockpile value by 24% to VND639 billion (US$29.8 million); also Thanh Cong Sugar (SBT), based in the southern province of Tay Ninh, reduced their stockpile value by 6% against the early season value to VND577 billion (US$27 million).

Besides the aforementioned measured, businesses have also tried to raise revenues from non-sugar products such as from ethanol or power production from sugar-cane dreg usage.

Sugar firms have also cashed in on price differences in the domestic and world markets through importing raw sugar for refined sugar production.

                                                                                                                                                                       Source VOV News