The Chinese government expects more than 150 small sugar mills to be faced with bankruptcy in the near future, according to a new report.
The assertion, contained in Research and Markets' Sugar in China: A Market Report underlines the difficulties the country faces as it restructures.
In general, cane sugar refineries are performing better than beet sugar refineries, most of which are currently recording losses. The government estimates that 152 of China's small sugar mills are faced with bankruptcy.
According to a separate report from the US agricultural attaché in Beijing, the sector is facing a great deal of pressure from the country's burgeoning sweetener market.
The production of starch-based sweeteners is expected to grow by 20 per cent in the coming year, as high sugar prices make them more competitive.
In contrast, sugar production has been lower than expected this year due to a drought in the southern provinces that damaged the cane crop and caused sugar prices to surge. In March standard grade sugar in the southern provinces cost RMB4960 (€515) per ton compared to about RMB2000 per ton during the same period last year.
As a result, the sugar industry is anticipating lower demand for the commodity this year compared with 2005 as food processors switch to cheaper sweeteners. Further, an industry survey suggests that sweetener production is not yet at full capacity. The sector is thought to have had capacity for 6 million tons in 2005.
But more could be coming onto the market.
However, despite price fluctuations due to the effects of altering world sugar prices and local shortages, the demand for sugar by Chinese consumers is still growing.
Growth is being stimulated by growing use of sugar as an ingredient in food and beverage products as well as an additive to foods and drinks.
Sugar cane is really a form of perennial grass, which is replanted every few years and contains approximately 10 per cent sugar. Sugar beet is an annual crop with around 15 per cent sugar content.
The retail market for sugar in China has grown by over 57.16 per cent since 1997 to RMB11.64bn ($1.41bn) in 2003.
The report on the sugar market in China addresses the ongoing developments within this specific sector. The report deals with both foreign companies in the sector, local initiatives and production.