Sugar import squeeze seen to affect Asia

Sugar import squeeze seen to affect Asia

LONDON (Reuters): Asia's financial crisis has slowed the
growth of emerging Far Eastern sugar markets, but the full impact
of an uneven import squeeze has still be felt, sugar analysts and
traders said.

Starting in Thailand last July, a sharp depreciation of Asian
currencies against the U.S. dollar, amounting to some 70 percent
for the Indonesian rupiah, escalated the cost of importing sugar
and other dollar-denominated products.

"For Indonesia it's serious and this has direct consequences
for Thai millers who developed the Indonesian market in recent
years," said Christoph Berg of German sugar analyst F.O. Licht.

"For other countries, such as South Korea and Malaysia, I
think the downturn will be rather limited," he added.

The variable impact of the squeeze reflects differing economic
profiles of Southeast Asian countries, which include high income
importers such as Japan and South Korea, low income importers,
notably Indonesia, and one major exporter -- Thailand.

In more mature markets such as Japan and South Korea, where
soft drinks and food industries are substantial users, the impact
is indirect.

But in Indonesia the effects are more immediate as 80 percent
of sugar is consumed directly and forms a much higher share of
disposable income.

Consumption of sugar substitutes such as high fructose corn
syrup and artificial sweeteners is also greater in higher income
countries, including Hong Kong and Singapore.

In Indonesia western analysts expect sugar imports to fall by
up to 15 percent in 1998, from an estimated 1.1 million tons in
1997 and 1.2 million in 1996.

Indonesia is the most important Far Eastern market and one of
the world's largest white sugar importers, even though it is a
significant sugar producer with annual output of more than two
million tons.

"I think that the 1998 figures will show a marked downturn,"
Berg said. "The 1997 figures were more or less unaffected because
contracts were honored, but in 1998 shipments will be much lower
because of payments problems."

Thailand, which supplies nearly two-thirds of Indonesia's
sugar imports, would be worst affected.

South Korea, where sugar consumption doubled to around 1.1
million tons between 1985 and 1996, is expected to cut imports by
up to five percent.

"Their export toll refining industry won't see much growth in
1997 or 1998. We shall see some stagnation and possibly a
downturn," Berg said.

South Korean raw sugar imports last year seemed to be largely
unscathed as existing contracts were fulfilled.

Between January and November South Korea imported 1.35 million
tons, up 5.5 per cent from the 1.278 million imported in the same
period in 1996. Imports were nearly all from Thailand and
Australia.

In Japan imports totaled 1,068,623 tons in the first eight
months of 1997, down from 1,081,877 tons in the same 1996 period.

The decline is seen as part of a long term trend, from 2.7
million tons in the mid-1970s to an expected 1.7 million in
1997/98, as wealthy and health-conscious consumers switch to
sugar substitutes.

In Malaysia, where imports have been growing strongly,
shipments will probably fall below 1 million tons in 1998 for the
first time in four years, analysts said .

Low, government-controlled sugar prices have boosted
consumption to an annual average of 40 kg per capita, which is
very high by western standards.

When the cash-strapped government recently announced a price
increase to curb consumption, panic buying and widespread
shortages ensued.

Sugar imports into Singapore and Hong Kong, two relatively
small higher-income countries, have so far been little affected,
according to the latest trade data.

Hong Kong's sugar imports in the first 11 months of 1997 rose
to 289,482 tons from 237,916 in the same 1996 period.

Singapore's imports totaled 240,997 tons raw value in the
first 10 months of 1997, down from 254,051 in the same period in
1996.

China's sugar imports fell by 37.5 percent to 780,000 tons in
1997, and will remain depressed in 1998, but this was due to a
large crop and the running down of stocks, analysts said.

China will continue to be a substantial net importer, but its
imports will be below 800,000 tons, against 1.1 to 1.2 million
tons in 1996/97, they added.

In Taiwan, state monopoly Taiwan Sugar Corp. said earlier this
month it expected to import up to 180,000 tons