Sugar auction to balance demand
By Zhang Lu (China Daily)
Updated: 2004-07-08 10:08

The Chinese Government intends to sell almost half a million tons of sugar from its State reserves to the market, in a bid to balance the market demand.

Starting this month, a total of 536,000 tons of sugar will be sold through an online auction, with a pricing floor set at 2,800 yuan (US$338), according to the No 37 Bulletin of the Ministry of Commerce issued on Tuesday.

Qualified members of the Beijing Huachu Sugar Trade Market can bid through the website www.mrm.com.cn from July 13 to 15, August 17 to 19, September 14 to 16, and October 12 to 13.

At the first three auctions, 150,000 tons of sugar will be sold each month, and the last 86,000 tons will be sold in October.

The auction will be suspended when the market price falls below the floor price, said the bulletin.

Some people said that the move would curb the rising price in the domestic market.

The price in major sugar production areas has risen from 2,400 yuan (US$289.86) per ton in the 2003-2004 season to above 2,900 yuan (US$350) per ton at present, statistics from the China Sugar Association show.

However, "the sale of the State reserved sugar will not have a big impact on domestic market price," said an official surnamed Jiang, with the sugar association.

As the Chinese Government is improving its policy transparency, sugar traders and producers have known of the arrangement for a long time and have prepared for it, said Jiang, who declined to be named.

"The government move is mainly to fill the market gap between supply and demand," he said.

Statistics show China produced 10.023 million tons of sugar during the 2003/2004 producing season which started last September and ended last month.

Though higher than the association's earlier estimation of 9 to 9.5 million tons, the number was still 600,000 tons less than the last sugar producing season.

At the same time, the country's sugar consumption continued to grow during the past several years and it is estimated to reach 11 million tons this year, Jiang said.

The big market shortage could only be supplied by the State reserved products and imported sugars.

The country's import quota has been issued and the association expects that China will buy about 300,000 to 400,000 tons of imported sugar this year.