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