* New tariff aimed at supporting domestic industry
* Ruling seen closing gap between Chinese and global prices
* Duty may spur smuggling, third-country exports - analysts
* Exporter Thailand downplays impact of move
(Updating with details throughout)
By Dominique Patton and Hallie Gu
BEIJING, May 22 China said on Monday it will
impose hefty penalties on sugar imports after lobbying by
domestic mills, but experts said the ruling may not go far
enough to stem the flow of lower-priced sweetener into the
world's top importer.
The ruling, which will affect about a third of China's
annual sugar imports, introduces an extra tariff for the next
three years on shipments that the government said had "seriously
damaged" the domestic industry.
The move could dent imports from top growers such as Brazil
and Thailand as it will close the big gap between Chinese and
international prices. Chinese sugar prices are
around double those on the London market.
But traders said the higher tariffs will also likely spur
increased smuggling across China's porous southern border, while
some imports from major producers may be shipped through
third-party nations excluded from the tariffs.
Sugar is one of the few sectors in which China struggles to
compete given the higher costs of its smallholder farmers, who
produce about 10.5 million tonnes of cane and beet sugar a year.
The country imports another 3 million tonnes of the
sweetener a year, while Beijing has been trying to crack down on
illegal shipments of as much as 2 million tonnes a year, sources
"While smuggling has temporarily slowed, there is a risk
that the incentives for smuggling are still strong and in fact
could increase if domestic prices rise," said Tom McNeill,
director of Green Pool Commodities in Brisbane.
The latest ruling exempted about 190 smaller countries and
regions from the new duty, including smaller producers such as
the Philippines and Pakistan as well as Myanmar on its southern
"Of course it will support the domestic industry for a short
time," said a China-based trader. "(But) the global raw sugar
market just needs to drop a little below 15 cents" to make it
profitable to import into China.
Global raw sugar prices were at 17 cents per lb on
China currently allows 1.94 million tonnes of imports at a
tariff of 15 percent as part of its commitment to the World
Imports beyond this attract a 50 percent levy. Monday's
ruling will add an extra 45 percent duty to these imports in the
current fiscal year, China's Commerce Ministry said in a
statement, taking the total to 95 percent. This will fall to 90
percent next year and 85 percent a year later.
The measures may also increase pressure on Beijing to sell
more of its state reserves to prevent supplies tightening and
Sugar futures initially fell more than 1 percent on
the news as traders interpreted the move, which was in line with
a draft proposal issued in April, as too lenient to staunch
shipments. They were trading down 0.6 percent at 0650 GMT.
Thailand, the world's third largest producer, played down
the impact of the duty.
Its millers have a much lower shipping cost to China than
rivals, Brazil and Australia, said Viboon Panitwong, chairman of
the Thai Sugar Millers Corp Ltd, who did not expect the duty to
significantly affect sugar exports.
Thailand exports about 300,000 to 400,000 tonnes of sugar to
China a year, but sells much more to Cambodia and Myanmar, which
then re-export sweetener to other countries.
($1 = 6.8890 Chinese yuan renminbi)
(Reporting by Dominique Patton and Hallie Gu; Additional
reporting by Patpicha Tanakasempipat in BANGKOK; Writing by
Josephine Mason; Editing by Richard Pullin)