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Indonesian refiners seek record raw sugar imports as demand climbs
August 08, 2016
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JAKARTA: Sugar refiners in Indonesia are seeking a higher quota for next year to import a record amount of raw sweetener as demand climbs.

Refiners want a quota of 3.41 million to 3.42 million metric tonnes in 2017, up from the previous record of 3.2 million tonnes this year, said Faiz Achmad, executive director at the Indonesia Sugar Refiners Association. The government typically raises the quota by 5 per cent annually, he said.

Indonesia’s sugar imports have more than doubled in the past decade as economic growth fuels increasing food consumption in the world’s fourth most-populous nation. The country is the second-biggest consumer of palm oil, the second-largest importer of wheat and raw sweetener. An improving lifestyle is boosting demand for finer foods, with bakeries to cafes and grocery stores spreading across the country, according to Achmad.

“It’s time for the government to re-evaluate its system,” Achmad said in an interview in Jakarta on August 3. “Demand is increasing by at least 6.5 to 7 per cent every year, so we have to at least match that. Higher allocation will ensure supply for all markets, including the small food industry, which is growing very fast.”

The refiners association represents 11 companies that process imported raw sugar for industrial use. Purchases are regulated by government permits. Sweetener for household consumption is supplied by other mills that crush domestic cane and through government imports.

The government has issued import permits for 2.7 million tonnes, or 84 per cent of the 2016 quota, said Achmad, a former director of food at the Industry Ministry. Refiners will produce about 3 million tonnes of refined white sugar this year with a maximum ICUMSA level of 80, he said. Output was 1.7 million tons in the first half, he said.

FUTURES RALLY

Raw sugar for October delivery rose 1.1 per cent to 19.92 cents per pound on ICE Futures US. Futures have surged 85 per cent in the past year in New York. White sugar futures in Europe have rallied about 59 per cent in the period.

Indonesia’s economy grew 5.18 per cent in the second quarter from a year earlier and compared with a revised 4.91 per cent in the first three months, the statistics agency said.

That exceeded the 5 per cent median estimate in a Bloomberg survey of 24 economists. Household consumption accounted for 55.2 per cent of gross domestic product in the second quarter, it said.

Thailand will be the main supplier and is set to account for at least 60 per cent of imports this year, said Achmad, who joined the association in January. The rest will come from Australia and Brazil, he said.

“Higher demand will most likely benefit Thailand because of a lower import tax,” Achmad said. Thai imports are subject to a 5 per cent tax as part of an Asean trade deal, compared with a 10 per cent duty for Australian sugar, he said.

Thailand may ship 3.2 million tonnes of sugar to Indonesia this year as the lower tax makes it more attractive, Piromsak Sasunee, chief executive officer of Thai Sugar Trading Corp., said in July.

Indonesia’s state sugar mills are also seeking imports. Perkebunan Nusantara, and Rajawali Nusantara Indonesia are seeking to purchase 114,000 tons of raw sugar for delivery end of August or September, said Adi Santoso, corporate secretary at Perkebunan Nusantara.

Dry weather due to El Nino curbed sugar cane yields, said the sugar refiners’ association’s Achmad. Production to drop to about 2 million tons this year from 2.5 million tons last year, he said.

Indonesia surprised with its strongest economic growth in 10 quarters in April-June, spurring some economists to predict it will outperform most Southeast Asian nations the rest of this year.

Bloomberg

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